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Foreign Currency Loans and Loan Arrears of Households in Central and Eastern Europe

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Abstract

Given recent adverse developments, widespread foreign currency borrowing in CEECs poses a serious challenge for financial stability. Against this background, we use survey data to study the determinants of loan arrears of private households. Our data confirm a non-negligible impact of foreign currency loans on financial vulnerability. However, higher loan delinquency rates in depreciation countries can only partly be explained by foreign currency borrowing. Employing survey information about the reasons for households’ financial difficulties, we show that income shocks exert a stronger impact on loan delinquency rates than the direct effect which works through increased installments on foreign currency loans.

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  • Elisabeth Beckmann & Jarko Fidrmuc & Helmut Stix, 2012. "Foreign Currency Loans and Loan Arrears of Households in Central and Eastern Europe," Working Papers 181, Oesterreichische Nationalbank (Austrian Central Bank).
    • Handle: RePEc:onb:oenbwp:181
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    Cited by:

    1. Majken Corti & Thomas Scheiber, 2014. "How Did CESEE Households Weather the Crisis? Evidence from the OeNB Euro Survey," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 76-87.
    2. Katharina Allinger & Elisabeth Beckmann, 2021. "Use of loan moratoria by CESEE households: who are the users and how vulnerable are they?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q3/21, pages 7-33.
    3. Ewald Nowotny & Peter Mooslechner & Doris Ritzberger-Grünwald (ed.), 2013. "A New Model for Balanced Growth and Convergence," Books, Edward Elgar Publishing, number 15470.
    4. Crespo Cuaresma, Jesús & Fidrmuc, Jarko & Hake, Mariya, 2014. "Demand and supply drivers of foreign currency loans in CEECs: A meta-analysis," Economic Systems, Elsevier, vol. 38(1), pages 26-42.
    5. Gianfranco Bisagni & Matteo Ferrazzi & Pia Pumberger, 2013. "Banking in CEE: less growth, more balance," Chapters, in: Ewald Nowotny & Peter Mooslechner & Doris Ritzberger-Grünwald (ed.), A New Model for Balanced Growth and Convergence, chapter 15, pages 226-240, Edward Elgar Publishing.
    6. Mariya Hake & Fernando Lopez-Vicente & Luis Molina, 2014. "Do the Drivers of Loan Dollarization Differ between CESEE and Latin America? A Meta-Analysis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-35.
    7. repec:ags:aoeisl:170471 is not listed on IDEAS
    8. Stepanchuk Serhiy & Ádám Reiff, 2012. "11th Annual Macroeconomic Policy Research Workshop at MNB: Microeconomic Behavior and its Macroeconomic Implications During the Financial Crisis," MNB Bulletin (discontinued), Magyar Nemzeti Bank (Central Bank of Hungary), vol. 7(3), pages 67-72, October.
    9. Fidrmuc, Jarko & Wörgötter, Andreas, 2014. "Euro Membership, Foreign Banks And Credit Developments During The Financial Crisis In Slovakia: A Case Study," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 17(1), March.
    10. Elisabeth Beckmann, 2017. "How does foreign currency debt relief affect households’ loan demand? Evidence from the OeNB Euro Survey in CESEE," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-32.
    11. Merike Kukk, 2023. "What are the triggers for arrears on debt over a business cycle? Evidence from panel data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2811-2833, July.
    12. Mariya Hake & Philipp Poyntner, 2019. "Household loans in CESEE from a new perspective: the role of income distribution," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q2/19, pages 75-93.
    13. Aleksandra Riedl, 2019. "Household debt in CESEE economies: a joint look at macro- and micro-level data," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/19, pages 6-28.
    14. Petr Jakubík & Thomas Reininger, 2013. "Determinants of Nonperforming Loans in Central, Eastern and Southeastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 48-66.

    More about this item

    Keywords

    Foreign currency loans; arrears; dollarization; euroization; household debt; non-performing loans; financial vulnerability; CEECs;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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