Determinants of Debt: An Econometric Analysis Based on the Cyprus Survey of Consumer Finances

Michalis Petrides and Alex Karagrigoriou
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Michalis Petrides: Department of Public and Business Administration and Center of Banking and Finance University of Cyprus, Nicosia
Alex Karagrigoriou: Department of Public and Business Administration and Center of Banking and Finance University of Cyprus, Nicosia

Financial Theory and Practice, 2008, vol. 32, issue 1, 45-64

Abstract: This work is based on the Cyprus Survey of Consumer Finances (CySCF) and focuses on the investigation of home secured loans and consumer credit card outstanding balances among Cypriot families. The CySCF runs on a triennial basis with the first database created in 1999 (CySCF1999). According to CySCF1999 and CySCF2002, the overall participation in home secured debt among all families declined from 29.95% in 1999 and 29.77% in 2002 to 25.77% in 2005 (CySCF2005). Credit cards were introduced in the early 1980s and grew significantly during the 1990s. The overall percentage of Cypriot households holding credit cards is estimated at 41.7% for 1999, 50% for 2002, and 48% for 2005. This work deals with the econometric analysis of home secured loans and consumer credit card outstanding balances and it provides results based on logit models. The main variables selected for home secured loans are the age, family status, specific attitude toward credit, employment status, and income. The resulting model exhibits a polynomial behaviour of degree two with respect to age. The main variables for consumer credit card balances are the age, education, general attitude, income code, home secured loans and riskiness. Worth noting is the high probability of having credit card balances for those households where the economically dominant unit is of low age with a positive attitude towards credit.

Keywords: debt distribution; family finances; home secured loan; credit card use; logit model. (search for similar items in EconPapers)
JEL-codes: C13 C51 C52 D10 G11 (search for similar items in EconPapers)
Date: 2008
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