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

By Jose M Garrido, Sanaa Nadeem, Nagwa Riad, Anjum Rosha, Chanda M DeLong, Nadia Rendak

August 28, 2020

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Jose M Garrido, Sanaa Nadeem, Nagwa Riad, Anjum Rosha, Chanda M DeLong, and Nadia Rendak. Tackling Private Over-Indebtedness in Asia: Economic and Legal Aspects, (USA: International Monetary Fund, 2020) accessed December 21, 2024

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.

Summary

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.

Subject: Asset and liability management, Corporate insolvency, Credit, Debt restructuring, Financial crises, Financial sector policy and analysis, Legal support in revenue administration, Money, Revenue administration, Solvency

Keywords: A number of debt-restructuring option, Asia and Pacific, Corporate debt, Corporate insolvency, Credit, Debt enforcement, Debt restructuring, Debt restructuring, Disposable income, Enterprise debt, Enterprise liability, Global, Household debt, Household debt expansion, Insolvency, Legal frameworks, Legal support in revenue administration, Legal system, Private debt, Reorganization procedure, Repayment plan, Resource allocation, Restructuring mechanism, Solvency, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/172
Stock No:

WPIEA2020172
ISBN:

9781513554952
ISSN:

1018-5941

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