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Assessing the Risk of Private Sector Debt Overhang in the Baltic Countries

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  • Ms. Valerie Herzberg

Abstract

Between 2000 and 2007 nonfinancial private sector credit expanded rapidly in the Baltic countries, resulting in a non-negligible build-up of debt. Could this legacy debt hold back the economic recovery of the region? This paper analyzes the setting in each of the three countries and, with the help of an experimental Debt Overhang Index (DOI), draws tentative conclusions for domestic demand.

Suggested Citation

  • Ms. Valerie Herzberg, 2010. "Assessing the Risk of Private Sector Debt Overhang in the Baltic Countries," IMF Working Papers 2010/250, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/250
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    References listed on IDEAS

    as
    1. Cottarelli, Carlo & Dell'Ariccia, Giovanni & Vladkova-Hollar, Ivanna, 2005. "Early birds, late risers, and sleeping beauties: Bank credit growth to the private sector in Central and Eastern Europe and in the Balkans," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 83-104, January.
    2. Mr. Atish R. Ghosh & Swart R. Ghosh, 1999. "East Asia in the Aftermath: Was there a Crunch?," IMF Working Papers 1999/038, International Monetary Fund.
    3. Thomas Laryea & Luc Laeven, 2009. "Principles of Household Debt Restructuring," IMF Staff Position Notes 2009/15, International Monetary Fund.
    4. Reuven Glick & Kevin J. Lansing, 2009. "U.S. household deleveraging and future consumption growth," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue may15.
    5. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    6. King, Mervyn, 1994. "Debt deflation: Theory and evidence," European Economic Review, Elsevier, vol. 38(3-4), pages 419-445, April.
    7. Thomas Laryea & Mr. Luc Laeven, 2009. "Principles of Household Debt Restructuring," IMF Staff Position Notes 2009/015, International Monetary Fund.
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    Citations

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    Cited by:

    1. Sandrine Levasseur, 2011. "Labour market adjustments in Estonia during the global crisis," Working Papers hal-01069525, HAL.
    2. van Wijnbergen, Sweder & Jakucionyte, Egle, 2017. "Debt Overhang, Exchange Rates and the Macroeconomics of Carry Trade," CEPR Discussion Papers 11788, C.E.P.R. Discussion Papers.
    3. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    4. Kukk, Merike, 2016. "How did household indebtedness hamper consumption during the recession? Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 764-786.
    5. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    6. Sandrine LEVASSEUR, 2012. "Labour market adjustments in Estonia during the 2008/2011 crisis," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 3, pages 123-143, June.
    7. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    8. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09iak4591pm is not listed on IDEAS
    9. Miss Catriona Purfield & Mr. Christoph B. Rosenberg, 2010. "Adjustment Under a Currency Peg: Estonia, Latvia and Lithuania During the Global Financial Crisis 2008-09," IMF Working Papers 2010/213, International Monetary Fund.
    10. Brown, Martin & Lane, Philip R., 2011. "Debt overhang in emerging Europe ?," Policy Research Working Paper Series 5784, The World Bank.
    11. Mari Avarmaa & Aaro Hazak & Kadri Männasoo, 2013. "Does leverage affect labour productivity? A comparative study of local and multinational companies of the Baltic countries," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(2), pages 252-275, April.
    12. Bas B. Bakker & Marta Korczak, 2017. "Phoenix from the Ashes: The Recovery of the Baltics from the 2008/2009 Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(4), pages 520-544, December.
    13. Mathias Lahnsteiner, 2013. "Private Sector Debt in CESEE EU Member States," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 30-47.

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    Keywords

    WP; debt; Latvia; Estonia;
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