Advertisement

Empirica

, Volume 45, Issue 3, pp 587–605 | Cite as

Assessing and predicting financial vulnerability of Italian households: a micro-macro approach

  • Alessandra Bettocchi
  • Elena Giarda
  • Cristiana Moriconi
  • Federica Orsini
  • Rita Romeo
Original Paper
  • 99 Downloads

Abstract

In this study we develop a micro-founded model to analyse the economic-financial conditions of Italian households. Using household level data, we build an indicator to identify vulnerable households based on their budget constraint and the composition of their financial portfolio. Then, we calculate the impact of the predicted trends of macroeconomic variables on the indicator in order to monitor its evolution in the short term (2015–2017). The empirical analysis is based on the Survey of Household Income and Wealth of the Bank of Italy and on a set of macroeconomic forecasts. Our findings suggest that the macroeconomic scenario for the period 2015–2017 implies a progressive reduction in the percentage of vulnerable households for the full extent of the projection.

Keywords

Households’ financial vulnerability Micro-founded models Financial margin Macroeconomic forecasts 

JEL Classification

D10 D14 G10 

Notes

Acknowledgements

The authors would like to thank Marianna Brunetti, Elizabeth Jane Casabianca, Lea Zicchino and Prometeia seminar participants for useful comments. Two anonymous referees are also kindly acknowledged. The opinions expressed in this article are our own and do not necessarily reflect those of the affiliated institution/s.

References

  1. Albacete N, Fessler P (2010) Stress testing Austrian households. Financial stability report 19, June, European Central BankGoogle Scholar
  2. Albacete N, Lindner P (2013) Household Vulnerability in Austria—A Microeconomic Analysis based on the Household Finance and Consumption Survey. Financial stability report 25, June, European Central BankGoogle Scholar
  3. Ampudia M, van Vlokhoven H, Zochowski D (2016) Financial fragility of Euro area households. J Financ Stab. doi: 10.1016/j.jfs.2016.02.003 Google Scholar
  4. Bank of Italy (2015) Financial Stability Report 2, November, Bank of Italy, RomeGoogle Scholar
  5. Bank of Italy (2016), Financial Stability Report 1, April, Bank of Italy, RomeGoogle Scholar
  6. Brandolini A, Cannari L (1994) Methodological appendix: the Bank of Italy’s Survey of Household income and Wealth. In: Ando A, Guiso L, Visco I (eds) Saving and the accumulation of wealth: essays on italian households and government behavior. Cambridge University Press, Cambridge, pp 369–386CrossRefGoogle Scholar
  7. Brown S, Taylor K (2008) Household debt and financial assets: evidence from Germany, Great Britain and the USA. J R Stat Soc Ser A 171(3):615–643CrossRefGoogle Scholar
  8. Brunetti M, Giarda E, Torricelli C (2016) Is financial fragility a matter of illiquidity? An appraisal for italian households. Rev Income Wealth 62(4):628–649CrossRefGoogle Scholar
  9. D’Alessio L, Iezzi S (2013) Household over-indebtedness: definition and measurement with Italian data. Occasional Papers 149, Bank of ItalyGoogle Scholar
  10. EC (2008) Towards a common operational European definition of over-indebtedness. European Commission, Directorate-General for Employment, Social Affairs and Equal Opportunities, http://ec.europa.eu/social/BlobServlet?docId=5093&langId=en. Accessed 26 July 2016
  11. ECB (2013) The Eurosystem Household, Finance and Consumption Survey, Results from the first wave. Statistics Paper Series 2, European Central BankGoogle Scholar
  12. Faiella I (2008) Accounting for Sampling Design in the SHIW. Working Paper 662, Bank of ItalyGoogle Scholar
  13. Galuščák K, Hlaváč P, Jakubík P (2014) Stress testing the private household sector using microdata. Working Paper Series 2, Czech National BankGoogle Scholar
  14. Georgarakos D, Lojschova A, Ward-Warmedinger M (2010) Mortgage indebtedness and household financial distress. Working Paper 1156, European Central BankGoogle Scholar
  15. Giarda E (2013) Persistency of financial distress amongst Italian households: evidence from dynamic models for binary panel data. J Bank Finance 37(9):3425–3434CrossRefGoogle Scholar
  16. Jappelli T, Pagano M, Di Maggio M (2013) Households’ indebtedness and financial fragility. J Financ Manag Mark Inst 1:26–35Google Scholar
  17. Lusardi A, Schneider D, Tufano P (2011) Financially fragile households: evidence and implications. Brookings Papers on Economic Activity, Spring, 83–134Google Scholar
  18. Magri S, Pico R (2012) L’indebitamento delle famiglie italiane dopo la crisi del 2008. Occasional Papers 134, Bank of ItalyGoogle Scholar
  19. May O, Tudela M (2005) When is mortgage indebtedness a financial burden to British households? A dynamic probit approach. Working Paper 277, Bank of EnglandGoogle Scholar
  20. McCarthy Y (2011) Behavioural characteristics and financial distress. Working Paper 1303, European Central BankGoogle Scholar
  21. Michelangeli V, Pietrunti P (2014) A microsimulation model to evaluate Italian Households’ financial vulnerability. Int J Microsimulation 7(3):53–79Google Scholar
  22. OECD (2015) Economic Outlook—Annex Tables. Issue 2, OECD, ParisGoogle Scholar
  23. Prometeia (2016) Economic Outlook (Rapporto di Previsione)—March 2016. Prometeia Associazione per le Previsioni Econometriche, BolognaGoogle Scholar
  24. Rubin DB (1987) Multiple imputation for non-response in surveys. Wiley, New YorkCrossRefGoogle Scholar
  25. Whitley J, Windram R, Cox P (2004) An empirical model of household arrears. Working Paper 214, Bank of EnglandGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.PrometeiaBolognaItaly
  2. 2.Cefin, University of Modena and Reggio EmiliaModenaItaly

Personalised recommendations