Household Response to the Economic Crisis Micro-simulation for the Czech Economy

Petr Jakubík

No 6, IFC Working Papers from Bank for International Settlements

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 Czech economy. As a result of the lack of individual data on the Czech household finances, micro data are simulated. Our analysis clearly points out that there is a significant additional decline in consumption related to an increase in household default rates. We find that potential household insolvencies have important implications for the financial system as well as for the aggregate economy.

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: 14 pages
Date: 2010-12
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