Focus on European Economic Integration Q1/21

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• Focus on European Economic Integration Q1/21 (PDF, 2.9 MB) March 2021

Studies and Analyses

• Call for applications: Klaus Liebscher Economic Research Scholarship (PDF, 63 kB) en Mar 2, 2021, 12:00:00 AM

• Prevalence and determinants of nonbank borrowing in CESEE: evidence from the OeNB Euro Survey (PDF, 1.2 MB) Allinger, Beckmann. Household vulnerabilities related to debt are often assessed by using information on bank loans, which, in terms of volume, certainly account for the most important form of indebtedness. Households can, however, also take on nonbank debt that potentially exposes them to greater risks. Drawing on the OeNB Euro Survey that is conducted regularly in Central, Eastern and Southeastern European (CESEE) countries, we present new and unique evidence on a dozen forms of debt for ten countries of this region. Specifically, we analyze which factors determine whether households hold bank debt versus what we refer to as secondary formal debt, i.e. debt from nonbank financial companies such as payday lenders. Policymakers in many jurisdictions have had a watchful eye on this kind of debt given that nonbank financial companies often target financially excluded or poor individuals by offering small, high-cost loans. In bivariate probit regressions, we show that individuals with characteristics that suggest increased vulner¬ability – e.g. lower income, unemployment, exclusion from banking services – are more likely to have secondary formal debt. We further find that the relationship with bank concentration is U-shaped. Finally, we provide some preliminary evidence that secondary formal debt is associated with a higher probability of arrears. en household debt, nonbank borrowing G21, G23, G51, D12, D18 Mar 2, 2021, 12:00:00 AM

• Are CESEE borrowers at risk? COVID-19 implications in a stress test analysis (PDF, 892 kB) Riedl. We simulate an increase in the unemployment rate to assess the impact of an income shock on the financial vulnerability of households in ten countries of Central, Eastern and Southeastern Europe (CESEE). According to our definition, a household is financially vulnerable when its debt service-to-income (DSTI) ratio is 40% or more. Using microdata from the 2019 fall wave of the OeNB Euro Survey allows us to calculate the share of vulnerable households in a consistent manner across countries. We use this indicator to analyze the response to various shock scenarios that are based on recent unemployment projections amid the COVID-19 pandemic. Given the unified microsimulation framework, we can provide a comparative assessment of the effects stemming from an increase in the unemployment rate on house¬holds’ debt service capacity across the ten examined CESEE countries. Our results suggest that the share of vulnerable households increases almost linearly with a rise in the unemployment rate but to a very different extent across countries. We identify several factors for the observed variability, one being the amount of wage replacement rates. In countries where unemployment benefits are comparatively high, adverse effects can be mitigated to a significant degree. en unemployment rate, Monte Carlo Analysis, income shock, CESEE, household indebtedness, comparative approach, microdata D10, D14, D30, E17, E44, G51 Mar 2, 2021, 12:00:00 AM

• CESEE’s macroprudential policy response in the wake of the COVID-19 crisis (PDF, 1.1 MB) Eller, Martin, Vashold. The COVID-19 crisis represents a major shock to the global economy with severe repercussions on financial markets. However, compared to the situation at the start of the global financial crisis (GFC), the banking system is better prepared to withstand the shock. Banks are better capitalized and the regulatory framework, including the macroprudential one, was substantially reinforced in the aftermath of the GFC in many countries across the globe. Hence, national authorities have increased leeway to respond to the recession and market instability caused by the pandemic. In this paper, we assess how EU member states in Central, Eastern and Southeastern Europe (CESEE) have adjusted their macroprudential policies in response to the COVID-19 crisis. To this end, we utilize a recently developed, intensity-adjusted index that tracks a broad set of macroprudential policy instruments. We find that countries responded quickly to the outbreak of the crisis by relaxing capital buffer and liquidity requirements, or at least refraining from previously planned tightening. At the same time, we observe that borrower-based measures and minimum reserve requirements were only rarely relaxed and risk weights were not changed at all. en macroprudential policies, CESEE, COVID-19, financial stability E58, E61, G18, G28 Mar 2, 2021, 12:00:00 AM

• Conference on European Economic Integration 2020 (PDF, 153 kB) CESEE in the COVID-19 crisis – the role of the EU and global spillovers en Mar 2, 2021, 12:00:00 AM

• 25th Global Economy Lecture: Pol Antràs on “Globalization and Pandemics” (PDF, 88 kB) en Mar 2, 2021, 12:00:00 AM

• Referees for Focus on European Economic Integration 2018−2020 (PDF, 99 kB) en Mar 2, 2021, 12:00:00 AM