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How the Crisis Affected Foreign Currency Borrowing in CESEE: Microeconomic Evidence and Policy Implications

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Abstract

Micro data collected in the OeNB Euro Survey show that in the aftermath of the global economic and financial crisis, households have come to perceive foreign currency loans as riskier, above all in those Central, Eastern and Southeastern European (CESEE) countries that experienced depreciations during the crisis. Despite this perceived increase in risk, a majority of respondents in six out of nine countries sill regard loans in euro as more attractive than loans in domestic currency. Data about the motives indicate that both supply and demand factors drive foreign currency loans. The mutual interest of banks and households and the still high attractiveness of foreign currency loans suggest that foreign currency borrowing is unlikely to vanish without policy intervention. If foreign currency borrowing were to be curbed in the short run, the only option for policymakers would be the implementation of regulatory and supervisory measures.

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File URL: http://www.oenb.at/dms/oenb/Publikationen/Volkswirtschaft/Focus-on-European-Economic-Integration/2011/Focus-on-European-Economic-Integration-Q1-11/chapters/feei_2011_q1_studies_02_tcm16-224902.pdf
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Bibliographic Info

Article provided by Oesterreichische Nationalbank (Austrian Central Bank) in its journal Focus on European Economic Integration.

Volume (Year): (2011)
Issue (Month): 1 ()
Pages: 25-43,112-113

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Handle: RePEc:onb:oenbfi:y:2011:i:1:b:2

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Keywords: Foreign currency loan; financial crisis; survey data; behavior of households; Central; Eastern and Southeastern Europe;

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References

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  1. Brzoza-Brzezina, Michał & Chmielewski, Tomasz & Niedźwiedzińska, Joanna, 2010. "Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter?," Working Paper Series 1187, European Central Bank.
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Cited by:
  1. IRC Expert Group of the ESCB, 2012. "Financial stability challenges for EU acceding and candidate countries: making financial systems more resilient in a challenging environment," Occasional Paper Series 136, European Central Bank.
  2. Szabolcs Szikszai & Tamás Badics & Csilla Raffai & Zsolt Stenger & András Tóthmihály, 2013. "Studies in Financial Systems No 8 Hungary," FESSUD studies fstudy08, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
  3. Jesús Crespo Cuaresma & Jarko Fidrmuc & Mariya Hake, 2011. "Determinants of Foreign Currency Loans in CESEE Countries: A Meta-Analysis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 69-87.
  4. Stephan Barisitz, 2011. "Nonperforming Loans in CESEE – What Do They Comprise?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 46-68.
  5. 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.
  6. Konstantins Benkovskis & Andrejs Bessonovs & Martin Feldkircher & Julia Wörz, 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, pages 8-36.

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