Tackling Private Over-Indebtedness in Asia: Economic and Legal Aspects

38 Pages Posted: 30 Oct 2020

See all articles by Sanaa Nadeem

Sanaa Nadeem

International Monetary Fund (IMF)

Nagwa Riad

affiliation not provided to SSRN

Anjum Rosha

International Monetary Fund (IMF)

Chanda DeLong

International Monetary Fund

Nadia Rendak

International Monetary Fund (IMF)

Date Written: August 2020

Abstract

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.

Keywords: Solvency, Debt restructuring, Legal support in revenue administration, Corporate insolvency, Credit, WP, graphic tag0, household debt, legal system, debt enforcement, enterprise debt

JEL Classification: D14, E44, G33, H63, H20, E50

Suggested Citation

Nadeem, Sanaa and Riad, Nagwa and Rosha, Anjum and DeLong, Chanda and Rendak, Nadia, Tackling Private Over-Indebtedness in Asia: Economic and Legal Aspects (August 2020). IMF Working Paper No. 20/172, Available at SSRN: https://ssrn.com/abstract=3721196

Sanaa Nadeem

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Nagwa Riad

affiliation not provided to SSRN

No Address Available

Anjum Rosha

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Chanda DeLong

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Nadia Rendak

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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