The distribution of debt across euro area countries: the role of individual characteristics, institutions and credit conditions

Bover, Olympia; Du Caju, Philip; Tzamourani, Panagiota; Villanueva, Ernesto; Sierminska, Eva; McCarthy, Yvonne; Casado, Jose; Costa, Sónia; Zavadil, Tibor

The distribution of debt across euro area countries: the role of individual characteristics, institutions and credit conditions

Olympia Bover (), Philip Du Caju, Panagiota Tzamourani, Ernesto Villanueva, Eva Sierminska, Yvonne McCarthy, Jose Casado (), Sónia Costa and Tibor Zavadil

No 1639, Working Paper Series from European Central Bank

Abstract: The aim of this paper is twofold. First, we present an up-to-date assessment of the differences across euro area countries in the distributions of various measures of debt conditional on household characteristics. We consider three different outcomes: the probability of holding debt, the amount of debt held and, in the case of secured debt, the interest rate paid on the main mortgage. Second, we examine the role of legal and economic institutions in accounting for these differences. We use data from the first wave of a new survey of household finances, the Household Finance and Consumption Survey, to achieve these aims. We find that the patterns of secured and unsecured debt outcomes vary markedly across countries. Among all the institutions considered the length of asset repossession periods best accounts for the features of the distribution of secured debt. In countries with longer repossession periods, the fraction of people who borrow is smaller, the youngest group of households borrow lower amounts (conditional on borrowing), and the mortgage interest rates paid by low-income households are higher. Regulatory loan-to-value ratios, the taxation of mortgages and the prevalence of interest-only or fixed rate mortgages deliver less robust results. JEL Classification: D14, G21, G28, K35

Keywords: financial literacy; fixed rate mortgages; household debt and interest rate distributions; loan-to-value ratios; taxation; time to foreclose (search for similar items in EconPapers)
Date: 2014-02
New Economics Papers: this item is included in nep-acc, nep-cba and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20141639

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