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Liquidity-poor households in the midst of the Covid-19 pandemic

Mariano Graziano () and David Loschiavo ()
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Mariano Graziano: Bank of Italy

No 642, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The Covid-19 pandemic led to a large and immediate decline in households’ aggregate spending and a surge in bank and postal 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 on deposits, 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.

Keywords: liquidity; distribution; financial poverty (search for similar items in EconPapers)
JEL-codes: D14 E21 E6 E66 H3 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-eec and nep-mac
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Journal Article: Liquidity‐poor Households in the Midst of the COVID‐19 Pandemic (2022) Downloads
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