Who Borrows And Who May Not Repay?
Source: Charles University
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.