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Distinguishing the components of household financial wealth: the impact of liabilities on assets in Euro Area countries

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  • Merike Kukk

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Abstract

The paper investigates the interdependence of household financial liabilities and assets, with special focus on the impact of liabilities on households’ holdings of financial assets. The paper uses the new ECB Household Finance and Consumption Survey from 2009–2010 covering euro area countries. The paper estimates a system of equations for households’ financial liabilities and assets, taking account of endogeneity and selection bias. The results indicate that higher household liabilities are related to lower holdings of financial assets. The findings are consistent with the hypothesis that wider use of credit leads to lower savings. The paper highlights that the distinction between the components of households’ wealth provides additional insights into households’ financial behaviour

Suggested Citation

  • Merike Kukk, 2014. "Distinguishing the components of household financial wealth: the impact of liabilities on assets in Euro Area countries," Bank of Estonia Working Papers wp2014-2, Bank of Estonia, revised 10 Oct 2014.
  • Handle: RePEc:eea:boewps:wp2014-2
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    Cited by:

    1. Kukk, Merike, 2016. "How did household indebtedness hamper consumption during the recession? Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 764-786.

    More about this item

    Keywords

    household debt; household wealth; financial assets; liabilities; financial vulnerability;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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