Breeding Ones' Own Subprime Crisis
AbstractIn this paper we take a simulation approach towards household budgets survey, analysing the impact of changes in labour market status of household members on the ability of this household to service the mortgage payments. Using the current status as benchmark, we performed simulations using stylised facts about labour market evolutions. Households with mortgage are characterised by higher activity rates and lower unemployment rates than demographically comparable households without a credit. While these are typical preconditions for the credit approval decision, this state of matters may not necessarily persist throughout the entire mortgage service period. Firstly, labour market conditions may worsen in general, comprising the credit takers together with the rest of the population. Alternatively, credit takers may undergo employment experience in the same way as other labour market participants. Consequently, we performed analyses along two scenarios: (i) households with mortgages will gradually become alike the demographically comparable group in terms of employment performance; and (ii) recognising the fact that debtor households members may exert potentially higher effort in maintaining labour market status we model the effects of general employment outlooks deterioration. We use labour force survey data to obtain the probabilities of changing the individual labour market status, while we resort to propensity score matching techniques to provide adequate benchmark for the changes among creditors with relation to general population. In the simulations we find the share of creditors losing liquidity with the change in the labour market status and the implied burden to the financial sector stability.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Faculty of Economic Sciences, University of Warsaw in its series Working Papers with number 2009-01.
Length: 17 pages
Date of creation: 2009
Date of revision:
financial sector stability; mortgages; labour market;
Other versions of this item:
- Daras, Tomasz & Tyrowicz, Joanna, 2009. "Breeding Ones' Own Subprime Crisis: The effects of labour market on financial system stability," MPRA Paper 15202, University Library of Munich, Germany.
- Daras, Tomasz & Tyrowicz, Joanna, 2011. "Breeding one's own sub-prime crisis: The labour market effects on financial system stability," Economic Systems, Elsevier, Elsevier, vol. 35(2), pages 278-299, June.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998.
"Characterizing Selection Bias Using Experimental Data,"
NBER Working Papers
6699, National Bureau of Economic Research, Inc.
- James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, Econometric Society, vol. 66(5), pages 1017-1098, September.
- George T Simigiannis & Panagiota Tzamourani, 2007. "Greek household indebtedness and financial stress: results from household survey data," IFC Bulletins chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring the financial position of the household sector", Basel, 30-31 August 2006 - Volume 2, volume 26, pages 157-171 Bank for International Settlements.
- Caliendo, Marco & Kopeinig, Sabine, 2005.
"Some Practical Guidance for the Implementation of Propensity Score Matching,"
IZA Discussion Papers
1588, Institute for the Study of Labor (IZA).
- Marco Caliendo & Sabine Kopeinig, 2008. "Some Practical Guidance For The Implementation Of Propensity Score Matching," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 22(1), pages 31-72, 02.
- Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," Discussion Papers of DIW Berlin 485, DIW Berlin, German Institute for Economic Research.
- Mortensen, Dale T & Pissarides, Christopher A, 1994.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Review of Economic Studies, Wiley Blackwell,
Wiley Blackwell, vol. 61(3), pages 397-415, July.
- Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
- Robert Shimer, 2008. "The Probability of Finding a Job," American Economic Review, American Economic Association, American Economic Association, vol. 98(2), pages 268-73, May.
- Ivana Herceg & Danijel Nestić, 2012. "A New Cluster-Based Financial Vulnerability Indicator: The Analytical Concept and its Application for Stress Testing in a Post-Socialist Economy," wiiw Balkan Observatory Working Papers, The Vienna Institute for International Economic Studies, wiiw 100, The Vienna Institute for International Economic Studies, wiiw.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcin Bąba).
If references are entirely missing, you can add them using this form.