Ruble Debt Burden

The burden of ruble debt is measured by a ratio between the amount of rubles that Russians borrowed from their banks and their monetary income. Why ruble debt only? The share of foreign currency credit to Russian households has been declining quite steadily and remained insignificant in recent years. Even in the peak of 2010 it fluctuated around 10%. The purpose of this study is to analyze the size, dynamics and determinants of debt burden. To achieve this purpose, a panel for 81 regions of the Russian Federation for 2000–2022 was assembled on the basis of official statistics. All variables proved to be non-stationary which allowed to use panel dynamic least squares (DOLS) to estimate the parameters of the cointegrating equation. The estimates proved the existence of long-term, equilibrium relationship between debt burden and explanatory variables. To support our empirical search for drivers of debt burden we relied on the theories of life-cycle, liquidity constraints and behavioral finance. The first two proved to be useful, while the role of behavioral finance remained unclear as it was impossible to operationalize such a murky concept as financial literacy. In accordance with the life-cycle theory, the share of working-age population in the region’s entire population proved to be the main driver of debt burden growth. We also found out that debt burden is positively related to housing prices and liquidity constraints measured by the income required to get the bank loan approved. Finally, the cycle of economic activity also adds to the dynamics of debt burden with the latter increasing in bad times. All these variables are cointegrating partners of debt burden in Russia.