Debt component of financial stability

Abstract

Subject. The article considers the debt burden of countries and institutional units within them as part of financial stability. Objectives. The purpose is to analyze the conditions and to trace long-term historical trends in the debt of non-financial sector as a factor of financial stability in relation to some developed and developing nations. Methods. The study rests on the review of counter-positions of various authors on the subject, the cross-country comparative analysis, cluster analysis, trend analysis, and the graphical method. Results. The paper offers a systematization of types of debt of institutional sectors, discloses theoretical foundations of debt analysis as a factor of financial stability, reveals long-term trends in non-financial sector’ debt, based on the Bank for International Settlements data covering information on 31 advanced economies and 13 emerging markets. Conclusions. The findings can be used by the Ministry of Finance and the Bank of Russia, when developing fiscal and monetary policy strategies and tools aimed at ensuring conditions for financial stability. The paper identifies countries with leverage (including public debt and private sector debt) exceeding critical thresholds in terms of constraints on economic growth and financial stability.