| By: |
Mali Chivakul;
Ke Chen Chen |
| Abstract: |
Although Bosnia and Herzegovina (BiH) has experienced rapid growth in credit
to households in recent years, most individuals are still credit constrained.
This paper analyzes the determinants of household credit demand and credit
constraints in BiH. To our knowledge, it is the first study on this topic
employing household survey data (2001 and 2004) from Emerging Europe. Our
results highlight the impact of the post-conflict and transitional nature of
the country on the behavior of borrowers and lenders. As expected, age,
income, wealth and education qualifications are the main factors driving
credit market participation, while high income and high wealth lower credit
constraints. In BiH, the probability of credit market participation peaks at
45 years old, considerably higher than in the advanced countries. At the same
time, older individuals are significantly more constrained than their peers in
the advanced countries. The results imply that the current credit boom may
largely reflect the overall post-war demand, and indicate the worse-off
position of the older generation in transition economy. Moreover, the results
underscore the structural nature of unemployment as well as the mismatch
between education qualifications and earning prospects in BiH. Education
variables have no significant effect on the likelihood of being constrained,
while, unlike in the advanced countries, being unemployed significantly
increases the likelihood. |
| Keywords: |
Bosnia and Herzegovina , Credit expansion , Credit restraint , Public debt , Education , Unemployment , Economic conditions , Interest rates , Inflation , Credit policy , Economic models , Working Paper , |
| Date: |
2008–08–27 |
| URL: |
http://d.repec.org/n?u=RePEc:imf:imfwpa:08/202&r=mfd |