What are the triggers for arrears on debt? Evidence from quarterly panel data

Merike Kukk

No wp2016-9, Bank of Estonia Working Papers from Bank of Estonia

Abstract: The paper investigates the triggers of arrears on debt in Estonia, which is a full recourse country similar to other euro area countries. An extensive individuallevel quarterly panel dataset enables quarterly debt repayment problems to be tracked while controlling for individual specific heterogeneity. The estimations show that lower income and higher debt service ratios are associated with a higher probability of arrears, confirming the “ability to pay†hypothesis. Newly taken consumer loans increase the probability of arrears and the relationship is stronger for loans granted during a recession when credit conditions were tight. Newly taken housing loans exhibit a lower probability of arrears and the same applies to loans granted during the period of easy credit conditions and high real estate prices. The results suggest that the most efficient measures for addressing arrears on debt would be those that mitigate income declines and the debt servicing burden

Keywords: arrears; income decline; the debt service ratio; housing loans; consumer loans (search for similar items in EconPapers)
JEL-codes: D12 D14 G21 (search for similar items in EconPapers)
Date: 2016-11-25, Revised 2016-11-25
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.bankofestonia.info/pub/en/dokumendid/pu ... nloads/wp09_2016.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eea:boewps:wp2016-9

Ordering information: This working paper can be ordered from
Estonia bld. 13, 15095 Tallinn, ESTONIA
info@epbe.ee

Access Statistics for this paper

More papers in Bank of Estonia Working Papers from Bank of Estonia Estonia bld. 13, 15095 Tallinn, ESTONIA. Contact information at EDIRC.
Bibliographic data for series maintained by Peeter Luikmel (peeter.luikmel@eestipank.ee).