Liquidity‐poor Households in the Midst of the COVID‐19 Pandemic

David Loschiavo and Mariano Graziano

Review of Income and Wealth, 2022, vol. 68, issue 2, 541-562

Abstract: The COVID‐19 pandemic led to a huge surge in deposits, although little is known about how this was distributed. This paper overcomes the lack of timely micro‐data on households’ liquidity by looking at supervisory data, introducing a new method to estimate the trend in liquidity distribution and the percentage of liquidity‐poor households. We find that in 2020 there was a decrease both in the degree of deposit inequality among Italian households and in the share of liquidity‐poor households, alongside government support measures that allowed some households at the bottom of the liquidity ladder to save out of their declining income. The increase in households’ liquidity improved their ability to repay debts, and this could help spending patterns to rebound once confidence about the economic outlook is restored. Despite this, households with insufficient liquidity buffers still constitute a large share of population, making their debt repayment capacity dependent on the strength of the economic recovery.

Date: 2022
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https://doi.org/10.1111/roiw.12581

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Working Paper: Liquidity-poor households in the midst of the Covid-19 pandemic (2021)
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