Household Financial Fragility, Debt and Income in a Dynamic Model

Giorgio Calcagnini, Federico Favaretto, Germana Giombini and Fabio Tramontana
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Giorgio Calcagnini: University of Urbino
Germana Giombini: University of Urbino
Fabio Tramontana: University of Urbino

Computational Economics, 2025, vol. 65, issue 2, No 16, 963-988

Abstract: Abstract We develop a novel dynamic model for household debt and household income change studying the interaction between financial fragility and financial literacy. We compare the results to the U.S. data under several parameterizations. Households react pro-cyclically to income shocks and are better able to represent aggregate data when financial literacy is low.

Keywords: Debt; Income; Piecewise defined maps; Financial fragility; Financial literacy. (search for similar items in EconPapers)
JEL-codes: C61 C62 C63 E21 G51 G53 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10614-024-10698-y

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