Economic recovery – a few topical theoretical problems

Tibor Erdõs

Public Finance Quarterly, 2010, vol. 55, issue 2, 251-277

Abstract: With a GDP decline of around 7.5 percent compared to the previous level we have probably reached the bottom of the crisis. The time to be spent here may vary depending on the concrete situation, but this is out of the scope of this paper. This article focuses on getting through the crisis. It discusses several economic correlations, especially those that are topical and important for the current state of the Hungarian economy. The question has recently been raised again: What can put the Hungarian economy on the road to recovery, and what growth rate can be expected in the longer run? A lot of people think that the state should play a crucial role in recovery. Of course, the role of the state is not negligible, but likewise, the mechanism that spontaneously affects recovery and later economic growth is not immaterial either. What is more, we can say that the operation of this mechanism is the fundamental momentum of recovery. There is currently great uncertainty about this topic. No wonder, since we have no experience about economic rejuvenation following the economic recession and the concurrent financial crisis. More rigorous studies have not been pursued, not even at theoretical level. This is, in part, due to the fact that the context was different earlier, under the socialist economic management, and also because after world war II recession was significantly smaller all over the world than in the current crisis. On top of that, in Hungary the study of civil economics was played down in the past forty years. This article examines whether the state budget can do anything for recovery. How are the correlations being complicated by the role of multinational companies in Hungary, as well as by the situation of small and medium-sized companies? What can be the task of monetary politics? What developments can be expected in exports, and in this respect, what can we expect from the rejuvenation of the global economy? To what extent should government policies fostering recovery pay attention to the factors of long-term economic growth? What is the role of the spontaneous mechanism in the recovery? How do external and internal factors contribute to recovery, what will fundamentally determine the turnaround after the economic slump, and how this will in turn determine the applicable economic policy? On the basis of reality, how strong and how dynamic will the expected recovery and growth be, respectively? The study begins with the examination of the role of the state budget, since a lot of people think that this is indispensable for the turnaround and the start of recovery.

Date: 2010
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