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The impact of unsecured debt on financial distress among British households

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  • Ana del Río

    ()
    (Banco de España)

  • Garry Young

    ()
    (Bank of England)

Abstract

This paper uses evidence from the British Household Panel Survey (BHPS) to examine how attitudes towards unsecured debt are related to household finances and other characteristics. An ordered logit model is estimated for 1995 and 2000 using a self reported indicator of financial distress as the dependent variable. This analysis suggests that the main factors causing debt problems are the unsecured debt income ratio, the level of mortgage income gearing, the level of financial wealth of households, their health, ethnicity and marital status. While the proportion of households reporting debt problems did not change between 1995 and 2000, there were important shifts among different groups. In particular, more households in the youngest age group reported debt repayments were a heavy burden in 2000, while the opposite applies to the oldest age group where a smaller proportion of households than in 1995 reported debt was a heavy burden. These changes can largely be accounted for by the changing economic circumstances of these groups rather than an unrelated shift in attitudes. In particular, the increase in indebtedness of the young was the main factor accounting for their greater tendency to report debt problems.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/05/Fic/dt0512e.pdf
File Function: First version, May 2005
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0512.

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Length: 33 pages
Date of creation: May 2005
Date of revision:
Handle: RePEc:bde:wpaper:0512

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Keywords: unsecured debt; british household panel survey; ordered-logit;

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References

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  1. Fabio Canova & Matteo Ciccarelli & Eva Ortega, 2004. "Similarities and convergence in G-7 cycles," Banco de Espa�a Working Papers, Banco de Espa�a 0404, Banco de Espa�a.
  2. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2005. "Dual employment protection legislation: a framework for analysis," Banco de Espa�a Working Papers, Banco de Espa�a 0510, Banco de Espa�a.
  3. Ana del Rio & Garry Young, 2006. "The determinants of unsecured borrowing: evidence from the BHPS," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(15), pages 1119-1144.
  4. Máximo Camacho & Gabriel Pérez-Quirós, 2005. "Jump-and-rest effect of U.S. business cycles," Banco de Espa�a Working Papers, Banco de Espa�a 0507, Banco de Espa�a.
  5. Berben, Robert-Paul & Locarno, Alberto & Morgan, Julian & Vallés, Javier, 2004. "Cross-country differences in monetary policy transmission," Working Paper Series, European Central Bank 0400, European Central Bank.
  6. repec:ese:iserwp:2000-04 is not listed on IDEAS
  7. Ana Buisán & Juan Carlos Caballero & José Manuel Campa & Noelia Jiménez, 2004. "La importancia de la histéresis en las exportaciones de manufacturas de los países de la UEM," Monetaria, Centro de Estudios Monetarios Latinoamericanos, Centro de Estudios Monetarios Latinoamericanos, vol. 0(2), pages 169-222, abril-jun.
  8. Boheim, Rene & Taylor, Mark P., 2000. "My Home Was My Castle: Evictions and Repossessions in Britain," Journal of Housing Economics, Elsevier, Elsevier, vol. 9(4), pages 287-319, December.
  9. Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4336, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," SOEPpapers on Multidisciplinary Panel Data Research 239, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Luis J. Álvarez & Emmanuel Dhyne & Marco M. Hoeberichts & Claudia Kwapil & Hervé le Bihan & Patrick Lünnemann & Fernando Martins & Roberto Sabbatini & Harald Stahl & Philip Vermeulen & Jouko Vilmun, 2005. "Sticky prices in the euro area: a summary of new micro evidence," Banco de Espa�a Working Papers, Banco de Espa�a 0542, Banco de Espa�a.
  3. Jessica Schicks, 2010. "Microfinance Over-Indebtedness: Understanding its drivers and challenging the common myths," Working Papers CEB, ULB -- Universite Libre de Bruxelles 10-048, ULB -- Universite Libre de Bruxelles.
  4. Meral Karasulu, 2008. "Stresstesting Household Debt in Korea," IMF Working Papers 08/255, International Monetary Fund.
  5. Ana Del-Rí­o & Garry Young, 2005. "The determinants of unsecured borrowing: evidence from the British Household Panel Survey," Bank of England working papers, Bank of England 263, Bank of England.
  6. Matthias Keese, 2010. "Who Feels Constrained by High Debt Burdens? – Subjective vs. Objective Measures of Household Indebtedness," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0169, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  7. Adela Luque, 2005. "Skill mix and technology in Spain: evidence from firm level data," Banco de Espa�a Working Papers, Banco de Espa�a 0513, Banco de Espa�a.
  8. Jessica Schicks, 2012. "Over-Indebtedness in Microfinance – An Empirical Analysis of Related Factors on the Borrower Level," Working Papers CEB, ULB -- Universite Libre de Bruxelles 12-017, ULB -- Universite Libre de Bruxelles.
  9. Georgarakos, Dimitris & Lojschová, Adriana & Ward-Warmedinger, Melanie, 2010. "Mortgage indebtedness and household financial distress," Working Paper Series, European Central Bank 1156, European Central Bank.
  10. Khandker, Shahidur R. & Faruqee, Rashid & Samad, Hussain A., 2013. "Are microcredit borrowers in Bangladesh over-indebted ?," Policy Research Working Paper Series 6574, The World Bank.
  11. Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland – estimations and simulations with micro data," Research Discussion Papers, Bank of Finland 5/2007, Bank of Finland.
  12. Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," Ruhr Economic Papers, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen 0150, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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