An Analysis of Household Debt using the Linkage between Micro and - - PowerPoint PPT Presentation

An Analysis of Household Debt using the Linkage between Micro and Macro Balance Sheet data

Juha Honkkila and Ilja Kristian Kavonius NTTS Conference, March 10-12.2015 Brussels

Purpose of the paper

• Financial stability and welfare analysis
• Financial stability requirements for timely data for potential balance sheet

risks (for instance the IMF/FSB report to the G-20 Finance Ministers and Central Bank Governors)

• The rise of the GDP and Beyond discussion (Sitklitz-Sen-Fitoussi, Piketty…)
• Identifying vulnerable household groups
• Risk of financial insolvency caused by high indebtedness compared to income

and/or wealth

• Combined use of micro and macro data
• More timely distributional data

Methodology

• Wealth concept: hybrid concept using items that are comparable

across the two sources only

• Deposits, mutual fund shares, quoted shares, bonds and other debt

securities, pension funds and life insurance

• Including every item from the macro framework would require too much

estimation and increase the uncertainty of the results

• Target population adjustments
• Non-profit organisations serving households and institutionalised households

not included in survey target population

• Levels and changes in levels from macro data, distribution from micro

data

Debt to income ratio by income quintile

20 40 60 80 100 120 140 DE FR GR ES I II III IV V

Financial leverage ratio by income quintile

20 40 60 80 100 120 140 DE FR GR ES I II III IV V

Debt to asset ratio by income quintile

5 10 15 20 25 DE FR GR ES I II III IV V

Changes in financial leverage ratio by income quintile

• 15.0
• 10.0
• 5.0

0.0 5.0 10.0 15.0 20.0 25.0 DE FR GR ES I II III IV V

Time series aspect in DE, FR and ES

Next steps

• Development of time series analysis
• Differences in the economic behavior across income quintiles during

recession

• The significance of the top 1%