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Publications

Economic Costs of Distancing Policy Interventions, forthcoming in Economics and Human Behavior

[Preprint], [Data and Codes]

Outbreaks of new viruses are increasingly likely in the warming global climate. In the absence of medical treatments, distancing policy interventions (DPIs) are expected to remain the primary containment strategy. While effective in limiting social interactions and curbing transmission, DPIs also disrupt economic activity. This paper estimates the short-run economic effects of DPIs using monthly macroeconomic indicators from 44 countries during the first year of the COVID-19 pandemic. The main contribution of the paper is that its estimates account for not only the direct (DPI-compliant) but also the indirect (DPI-triggered voluntary) distancing effects of DPI-s, providing greater policy-relevance than earlier estimates neglecting indirect effects. DPI effects are identified in a two-stage empirical design. The first stage leverages a sharp decline in weekly social mobility following initial DPIs to isolate policy-driven behavior. The second stage carries these effects over to monthly indicators (industrial and manufacturing production, construction output, retail trade, inflation, and unemployment) using a difference-in-differences framework. I find substantial output losses attributable to DPIs, while voluntary distancing also contributed, but to a lesser extent. No significant inflationary or unemployment effects are detected. These findings suggest that output losses should be the primary economic concern when implementing distancing interventions in future pandemics.

Using confidence indicators for the assessment of the cyclical position of the economy

MNB Bulletin (discontinued), 7(2), June , 41-46. [BibTeX]

In an inflation targeting regime, the best possible knowledge of demand-side inflationary pressure is of priority importance for monetary policy. In applied macroeconomic models, this is traditionally represented by the actual position of the cyclical component of GDP (the output gap). This study aims at defining a new output gap indicator, which, as opposed to the traditionally employed methods, also relies on direct information concerning the actual utilisation of economic resources. Exploiting such information substantially improves the real-time stability of the output gap estimate. The output gap indicator generated by my method (resource utilisation gap) has convincing predictive power and therefore gives a valid indication of the demand-side inflationary pressure in the real economy. Taking the above into account, the method described below will become a useful additional tool to support decision-making in monetary policy in Hungary. 

Working Papers

Challenging the Ruler by Rallying the Voter: Evidence from an Electoral Autocracy

Joint with Tamás Kovalcsik (ELTE) and Mátyás Bódi (ELTE)

Do campaign rallies matter in electoral autocracies? We exploit a unique “greenfield” opposition campaign—the 2024 Country Tour of Péter Magyar, leader of TISZA, Hungary’s newly revived opposition party—to estimate the causal effect of campaign rallies on European Parliament election outcomes. Using settlement-level data, we combine a distance-based exposure design with fixed effects and coarsened exact matching to address non-random rally placement and spatial spillovers. Results show that exposure to a nearby rally increased TISZA’s vote share by 3.7–4.7 percentage points, accounting for at least 14% of its national result, while reducing the ruling party’s share by about 4 points. Effects are strongest for rallies held after-hours or closest to the election, and Google Trends evidence suggests an awareness-raising mechanism. These findings demonstrate that personal campaigning can yield substantial electoral gains even under media bias and organizational constraints, with implications for opposition strategy in hybrid regimes.

Drivers of Link Formation in Production Networks

Joint with Lajos Tamás Szabó (Central Bank of Hungary)

What makes a supplier more attractive than its competitors? Which firms are better at holding on to their buyers or suppliers? Such questions determine the shape of the production network of an economy by driving the formation and separation of input-output links. This paper aims to fill a gap in the literature by providing novel descriptive facts about the drivers of link formation using firm-to-firm transaction data from Hungary between 2014 and 2022. We compare firms engaging in link formation and separation to similar firms not involved in such linking decisions. We find that relatively better-performing (profitable, productive, faster growing) firms are more successful in attracting new and keeping existing buyers and suppliers. Contracting a new buyer is preceded by a surge in investments and new hires, suggesting a well-prepared decision.  Firms losing a buyer crank up hiring (sacrificing efficiency) in the last year before they lose their buyer. The evolution of the production network is driven by firm growth, productivity, and efficiency, enhancing aggregate productivity and network concentration.

Speed of Propagation in Production Networks

(Earlier versions available at SSRN: https://ssrn.com/abstract=4392276 or http://dx.doi.org/10.2139/ssrn.4392276 )

The Dot-com bubble, the Global Financial Crisis, and the post-COVID inflation were heavily influenced if not entirely triggered by localized sector-specific shocks, such as a financial market collapse, or the supply disruptions of important commodities. These aggregate events eventually unfolded as the triggering shocks' effects propagated through production networks. This paper aims to quantify the propagation speed by developing a novel econometric method. Estimations are carried out on an annual sample of 66 US industries between 1998 and 2020. The speed of propagation is identified from the propagation of industry TFP shocks within the production network into industry output and prices. Results show that the propagation time – the time shocks need to get transmitted between industries – was between 7 to 8 months on average and it accelerated after the GFC. These results provide evidence for dynamic shock propagation, which production network models have mostly overlooked.

The Effect of Distancing Policies on the Reproduction Number of Covid-19 

Corvinus Economics Working Papers, 2023/01

Distancing policies became the primary preventive interventions during the covid-19 pandemic. This paper estimates the effect of such interventions on the effective reproduction number (R) of this virus on a daily panel of 109 countries. The main contribution of this paper is the separation of policy compliant and voluntary distancing effects. I identify the policy compliant component of distancing behavior as rapid changes in social activity immediately after an intervention. This allows me to isolate the voluntary component as residual changes in activity. I use this voluntary component as a control in the main estimation of distancing policy effects on R. I distinguish (i) place restrictions: restricting destinations, and (ii) mobility restrictions: regulations on inland movements. I find strong and permanent effects for both types of restrictions. Place restrictions reduce R by 29 percent, mobility restrictions by 61 percent on average. Place and mobility restrictions, and voluntary distancing contributed 21, 44 and 14 percentage points to the global decline in R in the first wave.

Income Taxation, Transfers and Labour Supply at the Extensive Margin.

Joint with Péter Benczúr, Gábor Kátay and Áron Kiss. 

Banque de France Working paper series 487; 2014. p. 1-27. JRC89930 [BibTeX]

This paper estimates the effect of income taxation and transfers on labour supply at the extensive margin, i.e., the labour force participation. We extend existing structural form methodologies by considering the effect of both taxes and transfers. Non-labour income contains the (hypothetical) transfer amount someone gets when out of work, while the wage is replaced by the difference between net wages and the amount of lost transfers due to taking up a job (gains to work). To incorporate these components of the budget set, we employ a detailed tax-benefit model. Using data from the Hungarian Household Budget Survey (HKF), we find that participation probabilities are strongly influenced by transfers and the gains to work, particularly for low-skill groups and the elderly. Moreover, the same change in the net wage leads to a much larger change in the gains to work for low earners, making them even more responsive to wages and taxation. Overall, we find that a single equation can capture a large heterogeneity of individual responsiveness to taxes and transfers. Our parametric estimates can be readily utilized in welfare evaluations, or microsimulation analyses of tax and transfer reforms.

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Work in progress

Affective Polarization and Naive Realism