Assessing the Risk of Private Sector Debt Overhang in the Baltic Countries
IMF Working Papers, November 1, 2010
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- Assessing the Risk of Private Sector Debt Overhang in the Baltic Countries
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Bibliographic details
- Authors: Valerie Herzberg
- Published: November 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455209507.001
Summary / Abstract
- Between 2000 and 2007 nonfinancial private sector credit expanded rapidly in the Baltic countries, resulting in a non-negligible build-up of debt.
- The paper asks whether this legacy debt could hold back the economic recovery of the region.
- The analysis examines the setting in each of the three countries and uses an experimental Debt Overhang Index (DOI) to draw tentative conclusions for domestic demand.
Debt Overhang Index (DOI) and Analytical Approach
- The study employs an experimental Debt Overhang Index (DOI) to assess the potential drag of private sector debt on domestic demand.
- The paper analyzes each of the three Baltic countries separately to account for country-specific settings.
Key Findings and Conclusions
- Rapid expansion of nonfinancial private sector credit between 2000 and 2007 led to a notable debt build-up in the Baltic countries.
- Using the DOI, the paper draws tentative conclusions about implications for domestic demand (findings characterized as tentative).
Subjects and Keywords
- Subject: Consumption, Corporate sector, Debt burden, Financial statements, Income
- Keywords: debt, Estonia, Latvia, WP