This paper examines the effects of the announcement of different macroeconomic data on the forint/euro exchange rate and government securities yields. It focuses on establishing whether there is a significant correlation between the size or direction of exchange rate and yield movements and the...

The basic purpose of this study is to didactically demonstrate the factors shaping the currency swap stock of domestic banks prior to the crisis and to provide a descriptive analysis of how the structure and the functioning of the market changed during the crisis. The main conclusions of the...

MNB has received daily, transaction-level data on key Hungarian interest rate derivatives markets since the beginning of 2009 with the launching of the K14 report. The dataset that has accumulated since early 2009 provides an opportunity to better comprehend the structure and functioning of...

It is well documented in the literature that identified vector autoregression (VAR) models often produce puzzling results when the effect of unexpected monetary policy movements is estimated. Many authors find that raising interest rate generates protracted appreciation of the exchange rate (the...

This paper investigates currency mismatch in the Hungarian corporate sector. Using a novel dataset on non-financial firms we first identify firms with mismatch, measure their weight in the economy and show their main characteristics. We then analyze the performance of firms during the crisis. We...

The concept known as FX settlement risk (aka Herstatt risk) came into focus some thirty years ago when Bankhaus Herstatt, a small German bank, became insolvent leaving its counterparties with credit exposure equivalent to the nominal value of receivables in US dollar from FX transactions, for...

The subject of our study is market liquidity, which is an important element of the functioning of financial markets. Adequate liquidity of markets is of great significance from the point of view of both market participants and the central bank. On the one hand, of all market segments an...

The paper proposes a structural empirical model capable of examining exchange rate smoothing in the small, open economy of Hungary. The framework assumes the existence of an unobserved and changing implicit exchange rate target. The central bank is assumed to use interest rate policy to obtain...

A standard rational expectations model would give strong predictions about the behavior of the nominal exchange rate at the beginning of a disinflation (a rise in interest rates): a substantial initial appreciation, followed by a steady depreciation. It largely conflicts actual observations,...

This paper sets up an options-based model of the exchange rate in a target zone system according to which the observed exchange rate is equivalent to a floating exchange rate adjusted with the value of two options. The strike prices of the options are the limits of the band, but the two options...