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Italian households' debt: determinants of demand and supply

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  • Silvia Magri

    ()
    (Bank of Italy, Economic Research Department)

Abstract

This paper analyzes the determinants of Italian householdsÂ’ participation in the debt market, considering both demand and supply effects and using the Bank of ItalyÂ’s Survey of Household Income and Wealth. The probability of debt is positively influenced by age (until 35 years), which essentially acts as a demand factor. Among the economic variables, the role of income is important: it shows a positive correlation with the probability of debt, determined by forces acting in the same direction on both sides of the market. The uncertainty of income reduces the demand for loans, with the exception of self-employed workers, who are nevertheless subject to very rigid evaluation by lenders. Living in very small municipalities negatively affects loan demand, probably because of higher entry costs in the debt market. Education influences both the demand side, through entry costs, and banksÂ’ evaluation. Residence is a crucial parameter: beyond the negative impact of a greater economic risk, living in regions where banks face higher enforcement costs increases the probability that the loan demand is not accepted. The final part of the paper considers the size of desired debt, which seems positively linked to net wealth and future income profile. The recovered share of loans in the case of default has a positive effect on desired debt. In general, enforcement costs have increased in importance in the recent period.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 454.

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Date of creation: Oct 2002
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Handle: RePEc:bdi:wptemi:td_454_02

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Web page: http://www.bancaditalia.it
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Keywords: household debt; enforcement costs;

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Cited by:
  1. repec:etr:series:v:3:y:2012:i:11:p:341-350 is not listed on IDEAS
  2. Paiella, Monica & Pozzolo, Alberto Franco, 2007. "Choosing Between Fixed and Adjustable Rate Mortgages," Economics & Statistics Discussion Papers esdp07033, University of Molise, Dept. SEGeS.
  3. M.A. Akudugu, 2011. "Rural banks' financial capital and livelihoods development of women farmers in Ghana," Journal of Enterprising Communities: People and Places in the Global Economy, Emerald Group Publishing, vol. 5(2), pages 248-264, September.
  4. Lobna ABID & Zouari Dorra & Zouari Ghorbel Sonia, 2012. "Household indebtedness in Tunisia," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(10), pages 341-350.
  5. Wolswijk, Guido, 2005. "On some fiscal effects on mortgage debt growth in the EU," Working Paper Series 0526, European Central Bank.
  6. Meng, Xianming & Hoang, Nam T. & Siriwardana, Mahinda, 2013. "The determinants of Australian household debt: A macro level study," Journal of Asian Economics, Elsevier, vol. 29(C), pages 80-90.
  7. 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).
  8. Matthias Keese, 2009. "Triggers and Determinants of Severe Household Indebtedness in Germany," Ruhr Economic Papers 0150, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  9. Jonathan Crook & Stefan Hochguertel, 2007. "US and European Household Debt and Credit Constraints," Tinbergen Institute Discussion Papers 07-087/3, Tinbergen Institute.
  10. Fernando Nieto, 2007. "The determinants of household credit in Spain," Banco de Espa�a Working Papers 0716, Banco de Espa�a.
  11. Maria Semenova & Victoria Rodina, 2013. "Informal loans in Russia: credit rationing or borrower’s choice?," HSE Working papers WP BRP 14/FE/2013, National Research University Higher School of Economics.
  12. Stefano Cosma & Francesco Pattarin, 2012. "Attitudes, personality factors and household debt decisions: A study of consumer credit," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 12021, Universita di Modena e Reggio Emilia, Facoltà di Economia "Marco Biagi".
  13. Schürz, Martin & Beer, Christian, 2007. "Characteristics of Household Debt in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 58–79.
  14. Barbara Cavalletti & Corrado Lagazio & Daniela Vandone & Elena Lagomarsino, 2012. "The role of financial position on consumer indebted-ness. An empirical analysis in Italy," DEP - series of economic working papers 8/2012, University of Genoa, Research Doctorate in Public Economics.
  15. Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland – estimations and simulations with micro data," Research Discussion Papers 5/2007, Bank of Finland.
  16. Ke Chen Chen & Mali Chivakul, 2008. "What Drives Household Borrowing and Credit Constraints? Evidence from Bosnia & Herzegovina," IMF Working Papers 08/202, International Monetary Fund.
  17. Irving Fisher Committee, 2004. "The IFC's contribution to the 54th ISI Session, Berlin, August 2003," IFC Bulletins, Bank for International Settlements, number 17, May.
  18. Doan, Tinh & Gibson, John & Holmes, Mark, 2010. "What determines credit participation and credit constraints of the poor in peri-urban areas, Vietnam?," MPRA Paper 27509, University Library of Munich, Germany, revised 17 Dec 2010.

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