The Distribution of Debt Across Euro Area Countries: The Role of Individual Characteristics, Institutions and Credit Conditions

Abstract

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. The HFCN collects household-level data on households' finances and consumption in the euro area through a harmonised survey. The HFCN aims at studying in depth the micro-level structural information on euro area households' assets and liabilities. The objectives of the network are: Terms of use: Documents in EconStor may1) understanding economic behaviour of individual households, developments in aggregate variables and the interactions between the two;2) evaluating the impact of shocks, policies and institutional changes on household portfolios and other variables;3) understanding the implications of heterogeneity for aggregate variables; 4) estimating choices of different households and their reaction to economic shocks; 5) building and calibrating realistic economic models incorporating heterogeneous agents; 6) gaining insights into issues such as monetary policy transmission and financial stability.The refereeing process of this paper has been co-ordinated by a team composed of Gabriel Fagan (ECB), Pirmin Fessler (Oesterreichische Nationalbank), Michalis Haliassos (Goethe University Frankfurt) , Tullio Jappelli (University of Naples Federico II), Sébastien PérezDuarte (ECB), Jiri Slacalek (ECB), Federica Teppa (De Nederlandsche Bank), Peter Tufano (Oxford University) and Philip Vermeulen (ECB).The paper is released in order to make the results of HFCN research generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the author's own and do not necessarily reflect those of the ESCB. AcknowledgementsThe views expressed in this paper are those of the authors and do not necessarily reflect those of the respective National Central Banks or the European Central Bank. We would like to thank Asa Johansson for providing data on pre-and after-tax mortgage interest rates and Richard Blundell and an anonymous referee for helpful comments. All remaining errors are our own. Olympia Bover (corresponding author)Banco de España; e-mail: bover@bde.es Banco de EspañaOlympia Bover, Jose Maria Casado and Ernesto Villanueva Banco de Portugal Sonia Costa National Bank of Belgium Philip Du Caju Central Bank of Ireland Yvonne McCarthy CEPS / INSTEAD Research Institute Eva Sierminska Bank of Greece and Deutsche Bundesbank Panagiota Tzamourani National Bank of Slovakia Tibor ZavadilAbstract The aim of this paper is twofold. First, we present an up-to-date assessment of the differences across...

Household Saving Behaviour and Credit Constraints in the Euro Area

“…As households grow older and their income increases, they will have enough means to cover their expenses. Our result is also in line with the findings of Bover et al (2013) who show that negative saving and holding secured debt or unsecured debt is predominant in the beginning of the life cycle and decreases after the age of 44. There are no significant effects for the level of education.…”

“…We strictly follow Bover et al (2013) in selecting most of the variables of interest for credit conditions and the rules governing financial institutions. In addition, we include a set of pension-related variables, which have the advantage that they vary both across countries and across households.…”

Financial fragility of euro area households

“…Across countries there are differences in the time it takes to recover the collateral in case of a default. In the Netherlands the duration of a typical foreclosure is five months while in Italy it can last 56 months (Bover et al, 2013). This leads to differences across countries in the time a loan remains classified as non-performing when it is in default, making it more problematic to compare NPL ratios across countries.…”

Long-Lasting Consequences of the European Crisis

“…14 15 In 2009, for the countries presented in the Figure, the average ratio of pensioners to working-age population was 24.3%, the average employment rate was 70% and the average ratio of pension benefit per pensioner to labour productivity 13 See Foster et al (2013) and Casado et al (2014). 14 The decomposition, similar to that used by Boldrin et al (1999), is as follows:…”

“…4 Secondly, there are other papers that emphasise transmission mechanisms through which temporary negative shocks may have long-lasting effects, such as, for instance, unemployment hysteresis or changes in expectations giving raise to long-lasting non-fundamental shocks. 5 Thirdly, there is the revival of the "secular stagnation hypothesis", which Eggertsson and Mehrotra (2014) have formalised in a model that illustrates the possibility that a temporary deleveraging shock yields a permanent liquidity trap in which demand is permanently too low and real interest rates sufficiently negative for monetary policy to be permanently constrained by the Zero Lower Bound on policy interest rates. 6 While the financial nature of the crisis and the existence of hysteresis mechanisms may be relevant for understanding the transmission and persistence of shocks, they do not explain: i) why demand and growth prospects remain subdued even after the financial sector has been repaired in many countries, and ii) why long-lasting effects are now more of a concern than in previous recessions.…”