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Effects of interest rate and inflation shocks on household vulnerability in Austria: a microsimulation using HFCS data

Author

Listed:
  • Nicolas Albacete

    (Oesterreichische Nationalbank, Economic Analysis Division)

  • Isabel Gerstner

    (University of Vienna)

  • Niklas Geyer

    (University of Vienna)

  • Peter Lindner

    (Economic Analysis Division)

  • Nicolas Prinz

    (University of Vienna)

  • Verena Woharcik

    (University of Vienna)

Abstract

Motivated by the recent rise in interest rates and high inflation in the euro area, we test households’ resilience against these shocks by performing microsimulations to investigate the impact of these shocks on household vulnerability and on debt at risk. We identify financially vulnerable households in Austria using several vulnerability measures common in the literature and household-level data from the latest wave of the Household Finance and Consumption Survey (HFCS). We find that the inflation shock has a stronger impact on the share of vulnerable households than the interest rate shock. However, the interest rate shock has a stronger impact on debt at risk than the inflation shock: the debt of households becoming vulnerable after the former (typically mortgage debt) tends to be larger than the debt held by households becoming vulnerable after the inflation shock (typically nonmortgage debt). Compared to the euro area, the departing levels of household vulnerability and debt at risk are much lower in Austria. The impact of a combined scenario is similar in both regions.

Suggested Citation

  • Nicolas Albacete & Isabel Gerstner & Niklas Geyer & Peter Lindner & Nicolas Prinz & Verena Woharcik, 2022. "Effects of interest rate and inflation shocks on household vulnerability in Austria: a microsimulation using HFCS data," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 44, pages 69-77.
    • Handle: RePEc:onb:oenbfs:y:2022:i:44:b:3
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    File URL: https://www.oenb.at/dam/jcr:21081bd8-1f4c-4525-8d52-236873981585/05_FSR_44_Effects-of-interest-rate.pdf
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    References listed on IDEAS

    as
    1. Nicolas Albacete & Pirmin Fessler, 2010. "Stress Testing Austrian Households," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 19, pages 72-91.
    2. Ampudia, Miguel & van Vlokhoven, Has & Żochowski, Dawid, 2016. "Financial fragility of euro area households," Journal of Financial Stability, Elsevier, vol. 27(C), pages 250-262.
    3. Erwan Gautier & Herve Le Bihan, 2022. "Shocks versus Menu Costs: Patterns of Price Rigidity in an Estimated Multisector Menu-Cost Model," The Review of Economics and Statistics, MIT Press, vol. 104(4), pages 668-685, October.
    4. Nicolas Albacete & Pirmin Fessler & Maximilian Propst, 2020. "Mapping financial vulnerability in CESEE: understanding risk-bearing capacities of households is key in times of crisis," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 39, pages 71-87.
    5. Sarah Kuypers & Jonas Boone & Johannes Derboven & Francesco Figari & Gerlinde Verbist, 2020. "Enhancing microsimulation analysis of wealth-related policies in EUROMOD," International Journal of Microsimulation, International Microsimulation Association, vol. 13(3), pages 5-26.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Cathal ODonoghue & Beenish Amjad & Jules Linden & Nora Lustig & Denisa Sologon & Yang Wang, 2023. "The Distributional Impact of Inflation in Pakistan: A Case Study of a New Price Focused Microsimulation Framework, PRICES," Papers 2310.00231, arXiv.org, revised Mar 2024.
    2. Hempell, Hannah S. & Silva, Fatima & Scalone, Valerio & Cornacchia, Wanda & Di Virgilio, Domenica & Palligkinis, Spyros & Velez, Anatoli Segura & Borkó, Tamás & Espic, Aurélien & Garcia, Salomón & Hei, 2024. "Implications of higher inflation and interest rates for macroprudential policy stance," Occasional Paper Series 358, European Central Bank.

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    More about this item

    Keywords

    macroprudential risk assessment; household vulnerability; stress tests; HFCS;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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