Insolvency and Economic Development:Regional Variation and AdjustmentRichard Fabling () and Arthur Grimes () Development and Comp Systems from EconWPA Abstract: This paper examines the determinants of the rate of forced insolvency in New Zealand. The study incorporates two key features. First, we use regional as well as national data to explain insolvencies. The data cover six regions which have had a variety of economic experiences over the sample period (1988–2003). Second, we explain the total rate of forced insolvency in New Zealand, including both personal bankruptcies and involuntary company liquidations. We find that increases in regional economic activity and regional property values (the latter representing collateral effects) reduce regional insolvencies. An increase in credit provision (increased leverage) raises the rate of insolvencies. In a low-inflation environment, a rise in the inflation rate reduces insolvencies, but this effect disappears in a high-inflation environment. We show that interactions between economic activity, leverage and property price shocks provide a rich understanding of how region-specific shocks can compound into significant localised economic cycles. Keywords: Insolvency; liquidation; bankruptcy; collateral; regional economy (search for similar items in EconPapers) Downloads: (external link) Related works: Access Statistics for this paper More papers in Development and Comp Systems from EconWPA |
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