Modelling Household Debt and Financial Assets: A Bayesian Approach to a Bivariate Two-Part Model
In this paper, we contribute to the empirical literature on household finances by introducing a Bayesian bivariate two-part model. With correlated random effects, the proposed approach allows for the potential interdependence between the holding of assets and debt at the household level and also encompasses a two-part process to allow for differences in the influences of the independent variables on the decision to hold debt or assets and the influences of the independent variables on the amount of debt or assets held. Finally, we also incorporate joint modelling of household size into the framework to allow for the fact that the debt and asset information is collected at the household level and hence household size may be strongly correlated with household debt and assets. Our findings endorse our joint modelling approach and, furthermore, confirm that certain explanatory variables exert different influences on the binary and continuous parts of the model.
|Date of creation:||2012|
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- Sarah Brown & Gaia Garino & Karl Taylor, 2008.
"Mortgages and Financial Expectations: A Household-Level Analysis,"
Southern Economic Journal,
Southern Economic Association, vol. 74(3), pages 857-878, January.
- Sarah Brown & Gaia Garino & Karl Taylor, 2005. "Mortgages and Financial Expectations: A Household Level Analysis," Discussion Papers in Economics 05/9, Department of Economics, University of Leicester, revised Dec 2006.
- Sarah Brown & Karl Taylor, 2008. "Household debt and financial assets: evidence from Germany, Great Britain and the USA," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 615-643. Full references (including those not matched with items on IDEAS)
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