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Why do households participate in the loan moratorium in Hungary? Theoretical and empirical considerations

Author

Listed:
  • Bálint Dancsik

    (Central Bank of Hungary (Magyar Nemzeti Bank – MNB), Szabadság tér 9, H-1054, Budapest, Hungary)

  • Zita Fellner

    (Central Bank of Hungary (Magyar Nemzeti Bank – MNB), Szabadság tér 9, H-1054, Budapest, Hungary)

Abstract

In order to mitigate the economic effects from the COVID-19 epidemic, a moratorium on loan repayments was introduced in several countries, including Hungary. Essentially, a loan moratorium provides additional finance for participants, allowing theories of both credit demand and consumption to be tested on debtors’ decisions as to whether or not they participate in the programme. In this paper, we use a linear probability model on the Hungarian survey data to examine the driving factors behind the households’ decision to participate in the scheme. Our results show that the younger debtors and those with more children are more likely to utilise the programme. Stretched financial situations, i.e., lower incomes, lower savings and higher payment-to-income ratios, increase the probability of continued participation as well. The chance of participating in the scheme also increases significantly when a household has faced borrowing constraints over the past two years, i.e., it has not been or only partially been able to satisfy its credit demand.

Suggested Citation

  • Bálint Dancsik & Zita Fellner, 2021. "Why do households participate in the loan moratorium in Hungary? Theoretical and empirical considerations," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 71(supplemen), pages 119-140, November.
    • Handle: RePEc:aka:aoecon:v:71:y:2021:i:supplement1:p:119-140
    DOI: 10.1556/032.2021.00032
    Note: The views expressed are those of the authors’ and do not necessarily reflect the official view of the Central Bank of Hungary (MNB).
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    More about this item

    Keywords

    loan moratorium; household finances; life-cycle; permanent income; borrowing; coronavirus; Hungary;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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