Multinational banks and the formation of debt-type economy in the countries of Central and Eastern Europe

Abstract

Research background: Given the fact that multinational banks’ credit activity leads to the accumulation of external debt in the borrowing countries, which potentially contributes to the formation of a debt-type economy, more in-depth research of the scope and consequences of such impact on the example of specific recipients is required. Purpose of the article: The purpose of the article is to develop theoretical and methodological bases of the study of multinational banks’ lending activity in terms of debt-type economy on the example of the countries of Central and Eastern Europe. Methods: A system of general scientific and special research methods, namely, statistical (correlation analysis, in particular), structural-functional and comparative analysis, has been applied to achieve the above-mentioned purpose. Findings & Value added: The results of the study indicate that multinational banks’ direct cross-border lending remains an important source of external debt accumulation and the formation of a debt-type economy in the countries of Central and Eastern Europe. Based on the assessment of the external debt indicators of the countries under the study, it has been determined that they all can be classified as debt-type economies. At the same time, the countries of the group still remain significantly differentiated in terms of relative indicators of direct cross-border lending and external debt. It has been concluded that multinational banks’ aggressive lending strategy during the growth phase in the countries of Central and Eastern Europe has exacerbated the problem of external indebtedness during the recession phase.

Keywords

• cross-border lending;
• external debt;
• multinational banks;
• central and eastern europe