sk sk

Policy Briefs

Policy Briefs are concise analytical pieces that emerge from policy work of economists and researchers across different departments of the National Bank of Slovakia. These texts either frame policy thinking within the bank or summarize our expertise on a specific topic that we would like to share with experts in the area (10 to 15 minutes read).

The views expressed are those of the authors and do not necessarily reflect those of the NBS.

 If you wish to be notified when the next edition is published, please sign up to the NBS mailing list.

No. 13


Should we worry about a wage-price spiral in Slovakia? Likely not!

Orchi Modhurima

  • Abstract

    The prospect of a “wage-price spiral” or the secondary effect from wages to inflation has raised concerns among various European countries. Using unit labour cost as a measure of nominal wage adjusted for productivity, we do not find any evidence supporting such occurrence in Slovakia in the aggregate economy or in the non-housing service sector. Even though lagged inflation has significant impact on the growth rate of unit labour cost, the predictive power of lagged unit labour cost for inflation is not observed. We do not find significant pass-through effect from unit labour cost growth rate to inflation at any point in time (2000-2023) including the recent period of accelerated inflation. Nevertheless, it is worth noting that labour market tightness remains important for inflation, possibly through the transmission channel of wage expectation.

No. 12


Five Key Aspects of Climate Change in Slovakia

Roman Vasiľ

  • Abstract

    Climate change and the necessary actions to combat it create significant risks and challenges for governments, financial sectors, businesses, and households across Europe. Against this backdrop, the European Commission (EC) developed ambitious plans to balance the need for fast decarbonization with the substantial economic costs associated with this process. Slovakia, a heavily industrialized economy, faces several hurdles in achieving a sustainable, decarbonized future. At the same time, it faces increasing physical risk in the form of floods or droughts, impacting sectors from agriculture to finance. This policy brief distils the key insights from a recent NBS conference titled ‘Climate and Sustainability Risks and Opportunities’. It emphasizes the crucial role of data, cooperation between the government, the financial sector and business, as well as regulatory support in addressing climate risks. In addition to flagging the challenges, the brief also explores opportunities inherent in tackling climate risk and sheds light on the role of banks in promoting environmentally responsible practices.

No. 11


Retail interest rates in Slovakia vs. other euro area countries

Ján Klacso, Fabio Martino

  • Abstract

    Interbank interest rates, as well as government bond yields, increased throughout the euro area after the ECB started to tighten its monetary policy in summer 2022. Banks reflected this development in both retail mortgage loan rates and term deposit rates. The increase in these rates was in practically all euro area countries in line with the estimated rise based on their historical development. On the other hand, interest rates on sight deposit increased less than estimated. In Slovakia, the situation is to a large extent comparable to other euro area countries. Mortgage loan rates and term deposit rates behave in line with their historical development. However, the increase in sight deposits rates has so far been even lower than the increase at the euro area level. This development confirms the importance of the financial stability concerns of the ECB related to the impact of a potential increase of funding costs on the earnings of European banks.

No. 10

4. 3. 2024

20 years of macroprudential policy – looking back and looking ahead

Ján Klacso, Reiner Martin

  • Abstract

    Macroprudential Policy (MPP) has been part of the economic policy toolkit in Europe for about 20 years. Pioneered in the then transition economies of Central, Eastern and South-Eastern Europe, it became a mainstream policy area across Europe after the Global Financial Crisis. After two decades, a recent conference, jointly organized by the National Bank of Slovakia, the Bank of Finland and SUERF, brought together leading academics and macroprudential policymakers to take stock and to provide some guidance on the future development of MPP.* The conference addressed the question what have we learned about the efficiency of the numerous MPP tools that are mainly used to tame economic and financial cycles and to strengthen the resilience of financial sectors? Did MPP help to cushion the crises that Europe experienced over the past two decades? What were the success factors and what were the mistakes? And how may MPP help to address the challenges that the European economy is currently facing, e.g. the transition towards a more market- and tech-based financial system, the transition to a sustainable economy and the possible shift to higher steady-state inflation. This Policy Brief summarises the main conclusions from the conference and the main remaining questions going forward.

No. 9

Quantifying the impact: How many jobs were saved by government job retention scheme during COVID-19?

Orchi Modhurima

  • Abstract

    During the sudden and widespread impact of the pandemic, fiscal interventions played a crucial role in facilitating employee retention.  The government’s  “First Aid” measures in Slovakia prevented a more significant contraction in employment among firms that experienced a substantial decline in sales during the crisis. By reducing labour cost and supporting wages, these interventions prevented increase in unemployment and ensured financial stability of workers despite reduced working hours.

No. 8

9. 8. 2023

“Creative destruction” in Slovak labour market: Impact of COVID-19

Orchi Modhurima

  • Abstract

    “Creative destruction” or reallocation of labour from less productive to more productive firms has been an ongoing phenomenon in Slovakia even prior to the pandemic. While the pandemic did have some effect in accelerating this process by enabling highly productive firms to expand at a faster pace, the impact was only marginal. However, the government’s job retention schemes implemented during the pandemic unintentionally introduced some repercussions by providing support to low-productivity firms. Nevertheless, it is worth noting that the negative impact on “creative destruction” due to these measures has been minimal in magnitude.

No. 7

25. 7. 2023

The Economic Benefits of Slovakia’s EU Membership

Pavel Gertler, Reiner Martin, Juraj Zeman

  • Abstract

    Nearly 20 years have passed since Slovakia became a member of the EU in 2004. Now is a good time to take stock of the economic benefits that Slovakia derives from being part of the EU. In this Policy Brief, we attempt a first, partial, assessment about how much welfare Slovakia is obtaining from it’s membership in the EU. More specifically, we are looking at three of the main channels how the EU impacts the Slovak economy: i) direct payments from the EU and their impact on growth, ii) costs of financing public debt and iii) welfare effects of international trade. Looking at these three channels only, we estimate that EU membership increases the level of Slovak GDP by more than 15% of GDP. In nominal terms, EU membership results in additional annual income of up to 4000 EUR per capita, or 16000 EUR additional income for a family of four. For the sake of brevity we are not covering in this Policy Brief the wider effects of EU regulation or the impact of membership in the euro area but will to do so in the future.

No. 6

6. 7. 2023

Job retention scheme and firm performance during the pandemic

Martin Nevický

  • Abstract

    Slovak firms receiving state aid during the pandemic (called first aid – FA) were in good financial condition before the pandemic but in some respects were more vulnerable than the rest of the firms. They were mostly profitable, less indebted firms particularly exposed to the pandemic and the subsequent containment measures. On the other hand, they operated with a higher share of wage expenditures in overall costs and with lower profitability before the pandemic. Most of the first aid went into loss mitigation; however, this substantially differed among industries. In accommodation and catering services and other services, FA support mainly mitigated losses. On the other hand, in the automotive industry and motor vehicle trade, FA acted to boost profits.

No. 5

10. 5. 2023

Do hawks sit on stronger branches? Central banks´ equity and policy reactions

Marcel Barmeier, André Casalis

  • Abstract

    In the midst of the current debate about whether an operational loss impair the ability of a central bank to achieve its goals, we look at the potential result of cumulating such losses over time: the equity position of the institution. We find that a stronger overall financial position is well correlated with a more aggressive tackling of inflation phenomena in the economy. However, central banks that expect higher pressure on the financial position due to participation in asset purchases do not react less decisively to inflationary pressure. We look at determinants of financial strength and find that more independent central banks have higher equity ratios, which is not driven by differences in the stages of economic development.

No. 4

25. 4. 2023

Macroprudential policy in the high inflation environment: Sailing uncharted waters

Carsten Detken, Ján Klacso, Reiner Martin

  • Abstract

    A long period of low and stable inflation and highly accommodative monetary policy ended in 2021. Macroprudential policy (MPP) was increasingly used during this period to counter the gradual increase in systemic risks in the banking sector. However, the recent increase in inflation and the tightening of monetary policy significantly transformed the macrofinancial environment for MPP, raising new questions about how to conduct MPP in a high-inflation environment. Given the considerable uncertainties facing the materialisation of macrofinancial vulnerabilities and the macroeconomic outlook, there appears to be no general advice on how to use MPP at the current juncture. The key question to ask before deploying capital-based measures is about the current state and future outlook of banking sector resilience. Against that background, it appears to be too early to release MPP capital buffers, and in some countries, an increase in macroprudential space might even be advisable. The situation regarding borrower-based measures must be seen in a more nuanced manner, given that the mortgage and real estate cycle in European countries is clearly turning. There is, however, no prior cross-national situation demonstrating that loosening capital is the most appropriate course of action at this stage because while looser lending standards might smooth over any cyclical correction, they may also generate challenges to financial stability in the medium term. Overall, it appears clear that the focus of MPP at this stage should be on preserving the resilience of the financial system. In contrast, the need to ‘tame the cycle’ and to prevent dynamic shocks to the financial cycle has clearly receded.

No. 3

17. 4. 2023

House Prices under Pressure: The Effect of Rising Borrowing Costs and Inflation

Patrik Kupkovič, Martin Cesnak

  • Abstract

    This policy brief assesses how rising inflation and borrowing costs may impact the housing market in Slovakia. The results of our analysis, in combination with the expected future path of inflation and interest rates, strongly suggest a downward trend in house prices going forward. More specifically, this policy brief shows that rising mortgage interest rates, rising inflation, and increasing government bond yields, historically had a downward impact on real property prices in Slovakia. The tightening of bank credit conditions, expressed through rising mortgage lending rates, has a sizeable and immediate adverse effect on the housing market. Rising inflation reduces disposable income and slows the economy. This also reduces real house prices, although with a lag. Rising government bond yields due to monetary policy tightening, finally, have a long-lasting negative impact on the housing market and the economy.

No. 2

23. 1. 2023

When food bites back

André Casalis

  • Abstract

    Markups for firms operating in food and beverages manufacture and sales sectors have increased in the first half of 2022, suggesting a decoupling between the increase in current production costs and prices. The evolution of markups in the period between the first quarter of 2015 and the second quarter of 2022, a high-inflation environment, shows, on one hand, a very recent dynamic evolution of the price setting behaviour displayed by food-related businesses, and on the other the remarkable stability of markups observed at broad aggregate level in the largest sectors of the Slovak economy.

No. 1

31. 8. 2022

Direct impact of energy price increases on firm profitability and producer prices

Ján Klacso, Tibor Lalinský

  • Abstract

    Increasing energy prices represent one of the main drivers of the recent increase of HICP inflation to double-digit figures. In this Policy Brief we focus on the first-round effects of increased energy prices on Slovak firms. Our results based on firm level data suggest that increasing energy prices may have a significant direct impact on the profitability of many firms. Without adjusting their prices, the number of firms reporting losses could increase substantially as a result of energy price increases. Moreover, almost all firms with high energy costs would end up with a loss. Therefore, we assume firms transmit increased energy costs to producer prices. The direct effect may reach up to 8% in some sectors to compensate for higher input costs if energy prices double. As energy intensive industries are important suppliers to other domestic industries, we may also expect significant upward second-round effects on producer prices and ultimately increasing consumer prices.


Your comments and remarks are welcome at