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Household debt burden and financial vulnerability in Luxembourg


  • Gaston Giordana


  • Michael Ziegelmeyer



We construct debt burden indicators at the level of individual households and calculate the share of households that are financially vulnerable using Luxembourg survey data collected in 2010 and 2014. The share of households that were indebted declined from 58.3% in 2010 to 54.6% in 2014, but the median level of debt (among indebted households) increased by 22% to reach € 89,800. This suggests that indebted households in 2014 carried a heavier burden than indebted households in 2010. However, among several debt burden indicators considered, only the debt-to-income ratio and the loan-to-value ratio of the outstanding stock registered a statistically significant increase. The median debt service-to-income ratio actually declined, mainly reflecting lower costs on non-mortgage debt. Using conventional thresholds to identify financially vulnerable households, we find that their share in the population of indebted households increased, although the change was only statistically significant when measured by the debt-to-income ratio. The different indicators of debt burden and financial vulnerability are highly correlated with several socio-economic characteristics, including age, gross income and net wealth. In particular, low income households have lower leverage and disadvantaged socio-economic groups (in terms of education, employment status and homeownership status) tend to be less financially vulnerable. However, after controlling for other factors, low income or low wealth increase the probability of being identified as vulnerable.

Suggested Citation

  • Gaston Giordana & Michael Ziegelmeyer, 2017. "Household debt burden and financial vulnerability in Luxembourg," BCL working papers 113, Central Bank of Luxembourg.
  • Handle: RePEc:bcl:bclwop:bclwp113

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    References listed on IDEAS

    1. Ramdane Djoudad, 2011. "A framework to assess vulnerabilities arising from household indebtedness using microdata," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Initiatives to address data gaps revealed by the financial crisis", Basel, 25-26 August 2010, volume 34, pages 151-168 Bank for International Settlements.
    2. Thomas K. Bauer & Deborah A. Cobb‐Clark & Vincent A. Hildebrand & Mathias G. Sinning, 2011. "A Comparative Analysis Of The Nativity Wealth Gap," Economic Inquiry, Western Economic Association International, vol. 49(4), pages 989-1007, October.
    3. Dimitris Christelis & Dimitris Georgarakos & Michael Haliassos, 2013. "Differences in Portfolios across Countries: Economic Environment versus Household Characteristics," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 220-236, March.
    4. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters,in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    5. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, January.
    6. Nicolas Albacete & Peter Lindner, 2013. "Household Vulnerability in Austria – A Microeconomic Analysis Based on the Household Finance and Consumption Survey," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 25, pages 57-73.
    7. Anastasia Girshina & Thomas Y. Mathä & Michael Ziegelmeyer, 2017. "The Luxembourg Household Finance and Consumption Survey: Results from the 2nd wave," BCL working papers 106, Central Bank of Luxembourg.
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    More about this item


    Household debt; Household financial vulnerability; Financial stability; HFCS; Household finance;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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