Bankruptcies, indebtedness and the credit cruch

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Title: Bankruptcies, indebtedness and the credit cruch
Author: Takala, Kari ; Virén, Matti
Organization: Suomen Pankki
Department / Unit: Suomen Pankin tutkimusosasto
Series: Suomen Pankin keskustelualoitteita
Series number: 28/1995
Year of publication: 1995
Publication date: 26.10.1995
Pages: 26 s.
Keywords: konkurssit; luotonanto; sääntely; luotot; suhdanteet; korot; velkaantuminen; luottolama
Abstract: This paper deals with Finnish bankruptcies.It shows that bankruptcies are strongly related to the business cycle and that they are perhaps even more strongly related to indebtedness, real interest rates and asset prices.The importance of these financial factors probably increased when the financial markets were liberalized in the early 1980s. Although there is a lot of seasonal and cyclical variation in bankruptcies the long run level (especially when adjusted to the number of firms) is almost constant representing some sort of "a natural rate of bankruptcies".What makes bankruptcies so important is the fact that they directly affect production, employment and credit expansion.The credit crunch effect in particular is scrutinized in the paper.

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