The Distribution and Dispersion of Debt Burden Ratios Among Households in Poland and its Implications for Financial Stability

Dawid Żochowski and Zajączkowski Sławomir

MPRA Paper from University Library of Munich, Germany

Abstract: Debt burden ratio as measured on the aggregate level does not give an adequate assessment of the ability of the household sector to repay its debt. The low level of financial deepening in Poland is primarily reflected in a low percentage of households that have been granted a loan. Therefore, the average debt burden for households, which have any debt outstandings could be much higher than the one measured on the aggregate level. If the debt is concentrated among groups of households with lower incomes, it can threat the financial stability in case of FX or interest rate shocks. Using the data from Polish Households Budget Survey we first define three different measures of debt burden and calculate its dispersion in time and distribution among income groups. We find that (1) the total debt service burden and loan service burden ratios are on lower levels than in other European countries and recently have not risen substantially, (2) the mortgage debt service burden ratio has been rapidly increasing in the last four years especially in lower income groups of households reaching in 2004 the 3/4 of the level noted in EU-15. In comparison with EU it seems that the level of indebtedness of house- holds in Poland is on a secure level. However, we notice that the secure level of debt burden ratio is on a lower level in emerging market countries than in wealthier countries because of the higher share of basic living costs in total consumption expenditure. Therefore, the increasing levels of mortgage debt service ratios in lower-income groups could pose a potential threat to the financial stability in case of FX or interest rate shock.

Keywords: Financial stability; debt burden; sebt service burden; haousehold indebtedness (search for similar items in EconPapers)
JEL-codes: E58 G0 G21 (search for similar items in EconPapers)
Date: 2006-07-31, Revised 2006-10-19
New Economics Papers: this item is included in nep-mac and nep-tra
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Citations: View citations in EconPapers (4)

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Related works:
Chapter: The distribution and dispersion of debt burden ratios among households in Poland and its implications for financial stability (2007)
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