Who Borrows And Who May Not Repay?

The authors use Household Budget Survey data to analyze the evolution of the household credit market in the Czech Republic over the period 2000-2008. They next merge their data with the Statistics on Income and Living Conditions in 2005-2008, in order to test the validity of the standard debt burden measure as a predictor of default. They propose an alternative indicator - the Adjusted Debt Burden (ADB), defined as the ratio of loan repayments to discretionary income, constructed as net income minus the living minimum, which turns out to be a superior predictor of default risk.