Households’ Financial Vulnerability

Marcelo Fuenzalida and Jaime Ruiz-Tagle ()

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: Households financial vulnerability determines households' default risk. Financial stability could be affected by households behaviour under stressing macroeconomic conditions. Households financial vulnerability depends on their indebtedness levels and on the fragility of their income sources to be able to fulfill their obligations. The main source of households uncertainty comes from labour income generation, which is critically determined by unemployment. Heterogeneity of indebtedness levels and of income uncertainty calls for microeconomic analysis. This paper uses panel data survival analysis to estimate the probability of job loss at the individual level. Using semiparametric methods, a significant heterogeneity is found for the impact of aggregate unemployment among individuals. Monte Carlo simulations are run to assess households financial stress and then to estimate aggregate debt at risk under high unemployment rates scenarios. Since the majority of debt is held by those with lower levels of income vulnerability, it is found that financial stability is not significantly affected by high unemployment levels.

Date: 2009-12
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Citations: View citations in EconPapers (8)

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Related works:
Chapter: Household Financial Vulnerability (2011)
Journal Article: Households’ Financial Vulnerability (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:540

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