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Borrowing in Foreign Currency: Austrian Households as Carry Traders

  • Christian Beer
  • Steven Ongena
  • Marcel Peter

Household borrowing in a foreign currency is a widespread phenomenon in Austria. Twelve percent of Austrian households report their housing loan to be denominated in either Swiss franc or Japanese yen for example. Yet, despite its importance, peculiar character, and immediate policy concerns, we know too little about the attitudes and characteristics of the households involved in this type of carry trade. We analyze a uniquely detailed financial wealth survey of 2,556 Austrian households to sketch a comprehensive profile of the attitudes and characteristics of the households involved. We employ both univariate tests and multivariate multinomial logit models. The survey data suggests that risk-loving, wealthy, and married households are more likely to take a housing loan in a foreign currency. High-income households are more likely to take a housing loan in general. These findings may partially assuage policy concerns about household default risk on foreign-currency housing loans.

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Paper provided by Swiss National Bank in its series Working Papers with number 2008-19.

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Length: 55 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:snb:snbwpa:2008-19
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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
  2. George Allayannis & Gregory W. Brown & Leora F. Klapper, 2003. "Capital Structure and Financial Risk: Evidence from Foreign Debt Use in East Asia," Journal of Finance, American Finance Association, vol. 58(6), pages 2667-2710, December.
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  7. Campbell, John, 2006. "Household Finance," Scholarly Articles 3157877, Harvard University Department of Economics.
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  10. Paiella, Monica & Pozzolo, Alberto Franco, 2007. "Choosing Between Fixed and Adjustable Rate Mortgages," Economics & Statistics Discussion Papers esdp07033, University of Molise, Dept. EGSeI.
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  12. Buly A Cardak & Roger K. Wilkins, 2008. "The Determinants of Household Risky Asset Holdings: Australian Evidence on Background Risk and Other Factors#," Working Papers 2008.05, School of Economics, La Trobe University.
  13. Christian Beer & Peter Mooslechner & Martin Schürz & Karin Wagner, 2006. "Austrian Households’ Financial Wealth: An Analysis Based on Microeconomic Data," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 94–110.
  14. Gabriele Galati & Alexandra Heath & Patrick McGuire, 2007. "Evidence of carry trade activity," BIS Quarterly Review, Bank for International Settlements, September.
  15. Tamás Bartus, 2005. "Estimation of marginal effects using margeff," Stata Journal, StataCorp LP, vol. 5(3), pages 309-329, September.
  16. Aggarwal, Raj & Goodell, John W., 2009. "Markets and institutions in financial intermediation: National characteristics as determinants," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1770-1780, October.
  17. repec:diw:diwfin:diwfin05040 is not listed on IDEAS
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