IDEAS home Printed from
   My bibliography  Save this paper

Stress-testing croatian households with debt -- implications for financial stability


  • Sugawara, Naotaka
  • Zalduendo, Juan


The purpose of this paper is to stress test the resilience of Croatian households with debt to economic shocks. The shocks not only impact a household's welfare, but also increase the probability of loan default. As a result, there is a direct link between these stress-testing exercises and financial stability risks. The authors find that very few households are at risk as a result of the shocks experienced over the past few years; new vulnerable households represent about 2 percent of all households, 6 percent of households with debt, and 2-3 percent of aggregate banking system assets. This suggests that household over-indebtedness in Croatia is unlikely to become a drag on aggregate economic activity and that financial stability risks remain manageable. One caveat should be noted. Some 27-31 percent of households with debt, representing 8-9 of banking system assets, are vulnerable even before being subjected to an economic shock. Since NPLs were low before the global financial crisis, it can be argued that banks knew something about some of these households that is not captured by household budget surveys. It follows that the calculations in this paper should primarily focus on the increased vulnerability of households as a result of shocks and are likely to represent an upper bound to the financial stability risks faced by Croatia on account of household indebtedness.

Suggested Citation

  • Sugawara, Naotaka & Zalduendo, Juan, 2011. "Stress-testing croatian households with debt -- implications for financial stability," Policy Research Working Paper Series 5906, The World Bank.
  • Handle: RePEc:wbk:wbrwps:5906

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. World Bank, 2010. "Croatia : Social Impact of the Crisis and Building Resilience," World Bank Other Operational Studies 2903, The World Bank.
    2. Evan Kraft, 2007. "The Boom in Household Lending in Transition Countries: A Croatian Case Study and a Cross-Country Analysis of Determinants," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(3), pages 345-366, September.
    3. Nicolas Albacete & Pirmin Fessler, 2010. "Stress Testing Austrian Households," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 19, pages 72-91.
    4. Sugawara, Naotaka & Sulla, Victor & Taylor, Ashley & Tiongson, Erwin R., 2010. "The Crisis Hits Home: Stress-Testing Households in Europe and Central Asia," World Bank - Economic Premise, The World Bank, issue 12, pages 1-4, May.
    5. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:unt:jnapdj:v:24:y:2017:i:2:p:23-52 is not listed on IDEAS
    2. Ampudia, Miguel & van Vlokhoven, Has & Żochowski, Dawid, 2016. "Financial fragility of euro area households," Journal of Financial Stability, Elsevier, vol. 27(C), pages 250-262.
    3. Gross, Marco & Población, Javier, 2017. "Assessing the efficacy of borrower-based macroprudential policy using an integrated micro-macro model for European households," Economic Modelling, Elsevier, vol. 61(C), pages 510-528.

    More about this item


    Debt Markets; Bankruptcy and Resolution of Financial Distress; Emerging Markets; Banks&Banking Reform; Currencies and Exchange Rates;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5906. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.