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Household loan loss risk in Finland: estimations and simulations with micro data

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  • Herrala, Risto
  • Kauko, Karlo

Abstract

This discussion paper presents a microsimulation model of household distress. We use logit analysis to estimate the extent to which a household's risk of being financially distressed depends on net income after tax and loan servicing costs. The impact of assumed macroeconomic shocks on this net income concept is calculated at the household level. The microsimulation model is used to simulate both the number of distressed households and their aggregate debt in various macroeconomic scenarios. The simulations indicate that household credit risks to banks are relatively well contained.

Suggested Citation

  • Herrala, Risto & Kauko, Karlo, 2007. "Household loan loss risk in Finland: estimations and simulations with micro data," Bank of Finland Research Discussion Papers 5/2007, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2007_005
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    References listed on IDEAS

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    Cited by:

    1. Herrala, Risto, 2009. "Credit crunch? An empirical test of cyclical credit policy," Bank of Finland Research Discussion Papers 10/2009, Bank of Finland.

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    More about this item

    Keywords

    financial stability; indebtedness; micro simulations; households;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • R29 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other

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