The Vienna Institute Monthly Report 1998/3
SUMMARIES

The challenges of EU accession for the Hungarian banking sector
As an important element of the preparation for EU accession, the financial sector regulation has been modified substantially in 1997 and a higher level of legal harmonization was reached. The Financial Institutions and Financial Services Act effective from 1991 was replaced by the Act on Credit Institutions and Financial Undertakings, and the Act on Investment Firms as well as the Act on the National Bank of Hungary were also amended. The new regulations came into force on 1 January 1997 and are based on the relevant directives of the EU and the principles and guidelines of the Basle Committee on Banking Supervision.

China: A difficult year ahead
In 1997 the Chinese economy grew by 8.8%, somewhat less than in 1996 (9.6%) and considerably slower than expected at the beginning of the year. Inflation was lower than anticipated as well. The main reason for the slowing down of the economy was weaker domestic demand, while exports expanded much faster than the year before, and together with sluggish imports, the trade surplus surged to a record size. The effects of the Asian crisis will be felt only this year. Assuming that certain internal policy measures are taken to balance out the negative effects of the crisis, we expect the Chinese economy to expand at a rate slightly below 8% in 1998.

Taylor rules in transition
East European transition economies have been applying widely different monetary and exchange rate policies and have been performing below their potential growth given by the long-run convergence rate to the EU economies. To give an initial assessment of the policies currently pursued, a simple Taylor rule provides a reasonably adequate account of monetary policy objectives. The application of the Taylor rule to the current situation in transition economies shows that in most of them the output and inflation targets are inconsistent with central banks' monetary policy. It is concluded that the real interest rates will have to fall significantly in these economies for their monetary policy to attain consistency.
 

 

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