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The Boom in Household Lending in Transition Countries: A Croatian Case Study and a Cross-Country Analysis of Determinants

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  • Evan Kraft

    (Croatian National Bank, Trg Hrvatskih Velikana 3, Zagreb 10002, Croatia.)

Abstract

Bank lending, and particularly lending to households, grew rapidly after the restructuring of transition countries' banking systems. While lending booms raise concerns about credit quality and the current account, a Croatian case study suggests that the credit quality issue may not be so severe in transition countries. Cross-country regressions show that transition countries displayed lower levels of household lending than non-transition countries with similar characteristics before 2005. Indicators of good policies, including recent low inflation and successful banking reform, are significant in explaining the ratio of household lending to GDP in transition countries. However, weak enterprise reform also leads to higher levels of household lending, pointing to a danger of unbalanced reforms resulting in unsustainable consumption and problems with external balances.

Suggested Citation

  • Evan Kraft, 2007. "The Boom in Household Lending in Transition Countries: A Croatian Case Study and a Cross-Country Analysis of Determinants," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(3), pages 345-366, September.
    • Handle: RePEc:pal:compes:v:49:y:2007:i:3:p:345-366
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    Citations

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    Cited by:

    1. Markus Eller & Michael Frömmel & Nora Srzentic, 2010. "Private Sector Credit in CESEE: Long-Run Relationships and Short-Run Dynamics," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 50-78.
    2. Albulena Shala & Valentin Toçi & Arben Mustafa, 2022. "Macroeconomic, Structural, and Bank-specific Determinants of Non-performing Loans in Central and Eastern Europe," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 70(5), pages 411-429, May.
    3. Sugawara, Naotaka & Zalduendo, Juan, 2011. "Stress-testing croatian households with debt -- implications for financial stability," Policy Research Working Paper Series 5906, The World Bank.
    4. Kraft, Evan & Galac, Tomislav, 2011. "Macroprudential regulation of credit booms and busts -- the case of Croatia," Policy Research Working Paper Series 5772, The World Bank.
    5. repec:onb:oenbwp:y:2010:i:2:b:1 is not listed on IDEAS
    6. Krunoslav Zauder & Mate Rosan, 2022. "Which Loans Do We Take? A Micro-Level Analysis of Croatian Households' Debt Participation," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 24(1), pages 5-41, June.

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