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Household Balance Sheets and Economic Crisis

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Abstract

This paper studies the economic impact of the current global economic downturn on the household sector. Household budgets can be negatively affected by declines in nominal wages and increases in unemployment. We empirically test this effect for the small open emerging economy. As a result of a lack of individual data on household finances, micro data are simulated. Our analysis clearly shows that there is a significant additional decline in consumption related to an increase in household default rates and unemployment. We find that potential household insolvencies have important implications for the financial system as well as for the macroeconomy.

Suggested Citation

  • Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
  • Handle: RePEc:fau:wpaper:wp2011_20
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    File URL: http://ies.fsv.cuni.cz/default/file/download/id/17066
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    Cited by:

    1. Costeiu, Adrian & Neagu, Florian, 2013. "Bridging the banking sector with the real economy: a financial stability perspective," Working Paper Series 1592, European Central Bank.

    More about this item

    Keywords

    credit cycle; households’ distress; insolvency; household default; aggregate consumption;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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