CEU Electronic Theses and Dissertations, 2019
| Author | Gyöngyösi, Győző |
|---|---|
| Title | Essays on Foreign Currency Borrowing of Households |
| Summary | This thesis consists if three chapters: the first chapter, co-authored with Steven Ongena and Ibolya Schindele, examines how monetary policy affects the credit supply of banks to households. The second chapter, co-authored with Emil Verner, analyzes how a financial crisis affects political preferences. The third, single-authored chapter analyzes the effect of a financial crisis on student outcomes. Chapter 1 studies the impact of monetary conditions on the supply of mortgage credit by banks to households. Using a comprehensive supervisory dataset from Hungary, we first establish a “bank-le nding-to-househ olds” channel by showing that monetary conditions affect the supply of mortgage credit in volume. We then study the impact of monetary conditions on the composition of mortgage credit along its currency denomination and borrower risk. We find that expansionary domestic monetary conditions increase the supply of mortgage credit to all households in the domestic currency and to risky households in the foreign currency. Because most households are unhedged, bank lending in multiple currencies may involve additional risk taking. Changes in foreign monetary conditions affect lending in the foreign currency more than in the domestic currency, but do not trigger compositional changes in the risk exposures of the banks. Chapter 2 studies the effect of the 2008 financial crisis on the vote share of the populist far right. We use the foreign currency borrowing of households in Hungary as a natural experiment. During the crisis the unexpected and large depreciation of the domestic currency increased the debt burden of households borrowing in foreign currencies but not of households borrowing in the local currency. We use zip code level variation in the prevalence of foreign currency borrowing of households, and show that the exposure to the depreciation significantly affected political preferences. A 10 percent unanticipated rise in indebtedness increased the vote share of the far right by 2.2 percentage points. This effect explains one third of the increase of their popularity by the 2010 election. Foreign currency debtors' na\"{i}vet\'{e}, persistent extremist attitudes, local labor market shocks, and immigration do not account for this increase. We present evidence that the conflict between creditors and debtors about the resolution of the crisis is an important mechanism in the electoral success of the far right. The far right sided with debtors against creditors by advocating policies to help households with foreign currency loans. Chapter 3 studies how households' financial distress affected the student development. I focus on the 2008 financial crisis, I use household foreign currency credit expansion as a natural experiment in Hungary. During the crisis the exchange rate shock increased the debt burden of households borrowing in foreign currencies but not of households borrowing in the local currency. I measure exposure to the depreciation at the zip code level by using credit registry data. I use administrative student level standardized test scores at the zip code level. My identification strategy compares the development of students attending the same class but living in different zip codes. I find that a 10 percent unexpected debt shock decreases the math and reading skills by .045 standard deviation. Increased unemployment in more exposed zip codes does not explain the worse results of students. |
| Supervisor | Szeidl, Ádám |
| Department | Economics PhD |
| Full text | https://www.etd.ceu.edu/2019/gyongyosi_gyozo.pdf |
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