What Drives Household Borrowing and Credit Constraints? Evidence from Bosnia and Herzegovina

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 to...

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Bibliographic Details
Main Author: Chen, Ke
Other Authors: Chivakul, Mali
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2008
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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653 |a Credit 
653 |a Income 
653 |a Labour; income economics 
653 |a Employment; Economic theory 
653 |a Monetary economics 
653 |a Self-employed 
653 |a Personal income 
653 |a Monetary Policy, Central Banking, and the Supply of Money and Credit: General 
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653 |a Unemployment 
653 |a Public employment 
653 |a Aggregate Human Capital 
653 |a Personal Income, Wealth, and Their Distributions 
653 |a Labor 
653 |a Education 
653 |a Education: General 
653 |a Self-employment 
653 |a Labor Demand 
653 |a Macroeconomics 
653 |a Wages 
653 |a Intergenerational Income Distribution 
653 |a Money and Monetary Policy 
653 |a Employment 
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520 |a 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