Discussion on The Anatomy of Household Debt Build Up: What are the Implications for the Financial Stability in Croatia?

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Discussion on The Anatomy of Household Debt
Build Up What are the Implications for the
Financial Stability in Croatia?

• Bostjan Jazbec
• IMF Senior Advisor to the Governor
• Central Bank of the Republic of Kosovo
• Dubrovnik, 25 June, 2010

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Quick Overview

• Neatly defined goal of the paper what are the
  implications for financial stability in Croatia?
• Great literature review
• Search for treshold of vulnerability
• Three approaches objective, subjective, and
  administrative
• Aim follow the changes in the distribution of
  household debt

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Problems with econometrics?

• Mostly solved
• Non-random sample of indebted households
• Macro vs. micro
• Quantile regression with correction for sample
  selection bias Machado and Mata decomposition
  method

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Data

• Household Budget Survey (HSB) vs. macro data
  discrepancy in debt exposure
• How to account for that in your model?
• Surprisingly mild rise of the proportion of
  indebted households from 2005 to 2008
• Focus on different categories of loan takers
  instead isnt that a little bit too detailed?
  (Table 2)

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Understanding the paper

• Calculating the probabilities of having debt in
  2008 prior of having debt in 2005
• What is interesting is the Machado-Mado
  decomposition of household debt growth!
• Banks are relaxing standards
• Building up the existing debt
• What about new debt?

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How I would understand it better?

• Data on bankss exposure
• Further elaboration on Table 2
• More on macro vs. micro evidence
• 2009?
• What is the implication for financial stability
  in Croatia?