Household Balance Sheets and Economic Crisis

Petr Jakubík

No 2011/20, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: This paper studies the economic impact of the current global economic downturn on the household sector. Household budgets can be negatively affected by declines in nominal wages and increases in unemployment. We empirically test this effect for the small open emerging economy. As a result of a lack of individual data on household finances, micro data are simulated. Our analysis clearly shows that there is a significant additional decline in consumption related to an increase in household default rates and unemployment. We find that potential household insolvencies have important implications for the financial system as well as for the macroeconomy.

Keywords: credit cycle; households’ distress; insolvency; household default; aggregate consumption (search for similar items in EconPapers)
JEL-codes: G28 G32 G33 G38 (search for similar items in EconPapers)
Pages: 18pages
Date: 2011-06, Revised 2011-06
New Economics Papers: this item is included in nep-ban
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Citations: View citations in EconPapers (1)

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