Foreign Currency Borrowing: The Case of Hungary

We use household survey data from Hungary to analyse the determinants of foreign currency (FX) borrowing. We do not find evidence that Hungarian FX borrowers are better educated, wealthier or more risk-loving than their peers. In fact, FX borrowing is a common phenomenon driven mostly by macroeconomic factors: high interest rate spreads, a relatively stable exchange rate and the competition of foreign owned banks. Although FX borrowing is widespread, our analysis suggests that loan losses directly attributed to it may be limited, given currency fluctuations up to autumn 2009.