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This discussion paper presents a microsimulation model of household distress. We use logit analysis to estimate the extent to which a household's risk of being financially distressed depends on net income after tax and loan servicing costs. The impact of assumed macroeconomic shocks on this net income concept is calculated at the household level. The microsimulation model is used to simulate both the number of distressed households and their aggregate debt in various macroeconomic scenarios. The simulations indicate that household credit risks to banks are relatively well contained.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. by Karlo Kauko Terms of use: Documents in ECB-CFS RESEARCH NETWORK ON CAPITAL MARKETS AND FINANCIAL INTEGRATION IN EUROPEIn 2005 all ECB publications will feature a motif taken from the €50 banknote. WO R K I N G PA P E R S E R I E S N O. 4 2 7 / J A N UA RY 2 0 0 5This paper can be downloaded without charge from http://www.ecb.int or from the Social Science Research Network electronic library at http://ssrn.com/abstract_id=634022. ECB-CFS RESEARCH NETWORK ON CAPITAL MARKETS AND FINANCIAL ECB-CFS Research Network on "Capital Markets and Financial Integration in Europe"This paper is part of the research conducted under the ECB-CFS Research Network on "Capital Markets and Financial Integration in Europe". The Network aims at stimulating top-level and policy-relevant research, significantly contributing to the understanding of the current and future structure and integration of the financial system in Europe and its international linkages with the United States and Japan. After two years of work, the ECB Working Paper Series is issuing a selection of papers from the Network. This selection is covering the priority areas "European bond markets", "European securities settlement systems", "Bank competition and the geographical scope of banking activities", "international portfolio choices and asset market linkages" and "start-up financing markets". It also covers papers addressing the impact of the euro on financing structures and the cost of capital.The Network brings together researchers from academia and from policy institutions. It has been guided by a Steering Committee composed of Franklin Allen (University of Pennsylvania), Giancarlo Corsetti (European University Institute), Jean-Pierre Danthine (University of Lausanne), Vítor Gaspar (ECB), Philipp Hartmann (ECB), Jan Pieter Krahnen (Center for Financial Studies), Marco Pagano (University of Napoli "Federico II") and Axel Weber (CFS). Mario Roberto Billi, Bernd Kaltenhäuser (both CFS), Simone Manganelli and Cyril Monnet (both ECB) supported the Steering Committee in its work. Jutta Heeg (CFS) and Sabine Wiedemann (ECB) provided administrative assistance in collaboration with staff of National Central Banks acting as hosts of Network events. Further information about the Network can be found at http://www.eu-financial-system.org.The joint ECB-CFS Research Network on "Capital Markets and Financial Integration in Europe" aims at promoting high quality research. The Network as such does not express any vie...