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Households’ foreign currency borrowing in Central and Eastern Europe

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  • Fidrmuc, Jarko
  • Hake, Mariya
  • Stix, Helmut

Abstract

Foreign currency loans represent an important feature of recent financial developments in CEECs. This might pose a serious challenge for macroeconomic stability. Against this background, we study the determinants of foreign currency loans of households, using data on the behavior of households in nine CEECs. Our results reveal that foreign currency loans are driven by households’ lack of trust in the stability of the local currency and in domestic financial institutions. Moreover, special factors including remittances and expectations of euro adoption play an important role in selected regions. The financial crisis reduced foreign currency borrowing, but there is some indication this effect might be only temporary.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 6 ()
Pages: 1880-1897

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Handle: RePEc:eee:jbfina:v:37:y:2013:i:6:p:1880-1897

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Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Foreign currency loans; Loan plans; Dollarization; Euroization; Monetary credibility; Trust; CEECs;

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References

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Citations

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Cited by:
  1. Pinar Yesin, 2013. "Foreign Currency Loans and Systemic Risk in Europe," Working Papers 13.06, Swiss National Bank, Study Center Gerzensee.
  2. Brown, Martin & de Haas, Ralph, 2012. "Foreign banks and foreign currency lending in emerging Europe," MPRA Paper 36323, University Library of Munich, Germany.
  3. Barisitz, Stephan, 2011. "Nonperforming Loans in CESEE – What Do They Comprise?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4.
  4. Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Kamil Galuscak & Tomas Holub & Eva Hromadkova & Narcisa Liliana Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Ivana Kubicova & Ji, 2012. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2012," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as12 edited by Romana Zamazalova & Jakub Mateju.
  5. Bessonovs, Andrejs & Feldkircher, Martin & Benkovskis, Konstantins & Wörz, Julia, 2011. "The Transmission of Euro Area Monetary Shocks to the Czech Republic, Poland and Hungary: Evidence from a FAVAR Model," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3.
  6. Fidrmuc, Jarko & Hake, Mariya & Cuaresma, Jesús Crespo, 2011. "Determinants of Foreign Currency Loans in CESEE Countries: A Meta-Analysis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4.
  7. Brown, Martin, 2013. "The transmission of banking crises to households : lessons from the 2008-2011 crises in the ECA region," Policy Research Working Paper Series 6528, The World Bank.
  8. Brown, Martin & Lane, Philip R., 2011. "Debt overhang in emerging Europe ?," Policy Research Working Paper Series 5784, The World Bank.

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