Insolvency and Economic Development:Regional Variation and Adjustment

Richard Fabling and Arthur Grimes

Development and Comp Systems from University Library of Munich, Germany

Abstract: This paper examines the determinants of the rate of forced insolvency in New Zealand. The study incorporates two key features. First, we use regional as well as national data to explain insolvencies. The data cover six regions which have had a variety of economic experiences over the sample period (1988–2003). Second, we explain the total rate of forced insolvency in New Zealand, including both personal bankruptcies and involuntary company liquidations. We find that increases in regional economic activity and regional property values (the latter representing collateral effects) reduce regional insolvencies. An increase in credit provision (increased leverage) raises the rate of insolvencies. In a low-inflation environment, a rise in the inflation rate reduces insolvencies, but this effect disappears in a high-inflation environment. We show that interactions between economic activity, leverage and property price shocks provide a rich understanding of how region-specific shocks can compound into significant localised economic cycles.

Keywords: Insolvency; liquidation; bankruptcy; collateral; regional economy (search for similar items in EconPapers)
JEL-codes: G33 O18 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2004-04-13
New Economics Papers: this item is included in nep-ent
Note: Type of Document - pdf; pages: 44
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/dev/papers/0404/0404006.pdf (application/pdf)

Related works:
Journal Article: Insolvency and economic development: Regional variation and adjustment (2005)
Working Paper: Insolvency and Economic Development: Regional Variation and Adjustment (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpdc:0404006

Access Statistics for this paper

More papers in Development and Comp Systems from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().