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Irish Households, Assessing the Impact of the Economic Crisis

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  • Cussen, Mary

    (Central Bank of Ireland)

  • Phelan, Gillian

    (Central Bank of Ireland)

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    Abstract

    The impact of the changing economic environment on Irish households has been significant, with net worth falling 30 per cent since 2006. This article uses Quarterly Financial Accounts data to investigate how they have adjusted to the vastly different economic climate with which they are now faced. It finds that households’ portfolio composition has shifted considerably, due largely to falling asset values. Results also suggest that households are now entering a long period of debt reduction. The consequence of deleveraging is a reduction in household consumption; a process that cannot proceed without an increase in the household savings rate. In the wake of the economic slowdown, there is a risk that increased savings could be a drag on consumption and bank lending in the future, with negative implications for the speed of economic recovery.

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    File URL: http://www.centralbank.ie/publications/Documents/Irish%20Households,%20Assessing%20the%20Impact%20of%20the%20Economic%20Crisis.pdf
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    Bibliographic Info

    Article provided by Central Bank of Ireland in its journal Quarterly Bulletin Articles.

    Volume (Year): (2010)
    Issue (Month): (October)
    Pages: 62-76

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    Handle: RePEc:cbi:qtbart:y:2010:m:10:p:62-76

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    1. David Duffy, 2010. "Negative Equity in the Irish Housing Market," The Economic and Social Review, Economic and Social Studies, vol. 41(1), pages 109-132.
    2. Cussen, Mary & Kelly, John & Phelan, Gillian, 2008. "The Impact of Asset Price Trends on Irish Households," Quarterly Bulletin Articles, Central Bank of Ireland, pages 70-84, July.
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    Cited by:
    1. Cussen, Mary & O'Leary, Brídín & Smith, Donal, 2012. "The Impact of the Financial Turmoil on Households: A Cross Country Comparison," Quarterly Bulletin Articles, Central Bank of Ireland, pages 78-98, April.
    2. Christian Dembiermont & Mathias Drehmann & Siriporn Muksakunratana, 2013. "How much does the private sector really borrow - a new database for total credit to the private non-financial sector," BIS Quarterly Review, Bank for International Settlements, March.

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