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Tackling Private Over-Indebtedness in Asia: Economic and Legal Aspects
Author:
Jose M Garrido null

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Miss Sanaa Nadeem
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Nagwa Riad
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Anjum Rosha null

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Ms. Chanda M DeLong
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Ms. Nadia Rendak
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Series:
IMF Working Papers
Volume/Issue:
Volume 2020: Issue 172
Language:
English
Publication Date:
28 Aug 2020
DOI:
https://doi.org/10.5089/9781513554952.001
ISBN:
9781513554952
ISSN:
1018-5941
Pages:
37
Keywords:
WP; household debt; legal system; debt enforcement; enterprise debt; restructuring mechanism; resource allocation; reorganization procedure; debt restructuring; disposable income; repayment plan; enterprise liability; a number of debt-restructuring option; Solvency; Debt restructuring; Legal support in revenue administration; Corporate insolvency; Credit; Global; Private debt; corporate debt; legal frameworks; insolvency; household debt expansion; Asia and Pacific
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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One consequence of interest rates remaining “too low for too long” since the Global Financial Crisis is the buildup in private leverage in emerging economies. These vulnerabilities have been laid bare by the COVID-19 shock. This paper employs the growth at risk framework (Adrian, Boyarchenko, and Giannone, 2019) to examine how different types of private leverage present risks to future GDP growth in Asian economies. We find evidence that private leverage can boost GDP growth in the near term, but can increase the risks of low growth over the medium term. For our sample, we also find that household debt poses a larger drag on future GDP growth than corporate debt. In the second part of the paper, we provide an overview of a strategy for prevention and resolution of over-indebtedness, with a focus on legal tools, and with considerations to account for the consequences of the COVID-19 pandemic. Using a novel cross-country survey, we examine the role of legal techniques to prevent and treat corporate and household over-indebtedness, benchmarking those in ASEAN-5, China, India, Japan and Korea against international best practice. The analysis can inform a country-specific prioritized approach to strengthening legal frameworks.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund