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The analysis of Hungary's external balance
In this research Hungary's external balance was examined. The main goal of the analysis was to identify the main factors that influence the external balance and determine their role in shaping demand for external finance. We prepared three scenarios in order to identify how the single elements will change in the future, and how they influence the external and internal financial situation. Within this, we regarded FDI in- and outflows, portfolio investments and EU transfers as exogen (explanatory) variables.
The interdependencies in the past were examined through fact data with time series analysis. The external balance was analysed by the current account statistics of the National Bank of Hungary, so the study follows its structure. In the course of modelling we fixed the direction of relationship between explanatory variables and external balance indicators. In this way, the explanatory variables can be present in equations just with a sign that are economically justified. For example, just positive connection can exist between export of goods and industrial GDP. We determined the set of potential explanatory variables at every row of the current account, and their relationship with the external balance was analysed. The models we got this way were inspected in a test period to see how well they perform.
As we also wanted to give a forecast for the external balance with this model system, we needed the future values of explanatory variables. In order to obtain them, we made projections on the macroeconomic indicators.
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