Household debt revaluation and the real economy: Evidence from a foreign currency debt crisis

Arbeitspapier

We examine the consequences of a sudden increase in household debt burdens by exploiting variation in exposure to household foreign currency debt during Hungary's late-2008 currency crisis. The revaluation of debt burdens leads to higher default rates and a collapse in spending. These responses lead to a worse local recession, driven by employment losses at non-exporting firms, and negative spillover effects on nearby borrowers without foreign currency debt. The estimates translate into a multiplier on higher debt service of 1.67. The impact of debt revaluation is particularly severe when foreign currency debt is concentrated on household, rather than firm, balance sheets.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MNB Working Papers ; No. 2020/2

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis
• Subject: household debt ; foreign currency debt ; currency crisis ; financial crisis ; business cycles

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Verner, Emil ; Gyöngyösi, Gyîozîo
• Event: Veröffentlichung
• (who): Magyar Nemzeti Bank
• (where): Budapest
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/241072
• Last update: 10.03.2025, 11:43 AM CET