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Financial Fragility across Europe and the US: The Role of Portfolio Choices, Household Features and Economic-institutional Setup

Marianna Brunetti, Elena Giarda and Costanza Torricelli

No 487, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: This paper investigates households’ financial fragility in twelve European countries and in the US by employing the first wave of the Household Finance and Consumption Survey (HFCS) and the 2010 Survey of Consumer Finances (SCF), respectively. Financial fragility is defined by taking into account both income constraints and portfolio composition (liquidity and indebtedness). Three main results emerge. First, the estimation of bivariate probit models reveals that in all countries holding an illiquid portfolio increases the likelihood of being financially fragile, while having a mortgage generally reduces it. Second, there are relevant differences among countries in their estimated average probability of financial fragility. Finally, decomposition of these differences by means of counterfactual methods provides evidence of a significant role of the country’s economic-institutional setup in providing a safety net against financial fragility. This is more true in Europe than in the US.

Keywords: household financial fragility; portfolio liquidity; mortgage; HFCS; SCF (search for similar items in EconPapers)
JEL-codes: C25 D12 D14 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2020-05-28, Revised 2020-05-28
New Economics Papers: this item is included in nep-eur
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Citations: View citations in EconPapers (6)

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Working Paper: Financial fragility across Europe and the US: The role of portfolio choices, household features and economic-institutional setup (2020) Downloads
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