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Differences in Borrowing Behaviour between Core and Peripheral Economies — Economic Environment versus Financial Perceptions

Author

Listed:
  • Weiou Wu

    (University of Limerick)

  • Apostolos Fasianos

    (University of Limerick)

  • Stephen Kinsella

    (University of Limerick)

Abstract

Using the Eurosystem Household Finance and Consumption (HFCS) data, this paper identifies the key differences in borrowing behaviour between core and peripheral nations. As such, we focus on non-collateralized debt such as credit card loans, bank overdrafts and other forms of non-collateralized debt, which reflect daily borrowing behaviour more closely than does mortgage debt. We examine the differences in levels and prevalence of these debts, and break down these differences into two major components: financial perceptions and the economic environment. We aim to explain to what extent these influences contribute to the differences in debt ownership and levels of holding between core and peripheral countries in Europe. We found that differences in financial perceptions do contribute to the differences in debt in a significant way, while the economic environment contributes little to this outcome. Households in the European periphery are much more conducive to debt if they have the same financial perceptions as those in the core countries in Europe.

Suggested Citation

  • Weiou Wu & Apostolos Fasianos & Stephen Kinsella, 2015. "Differences in Borrowing Behaviour between Core and Peripheral Economies — Economic Environment versus Financial Perceptions," Working Papers 201516, Geary Institute, University College Dublin.
  • Handle: RePEc:ucd:wpaper:201516
    as

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    File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp201516.pdf
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    References listed on IDEAS

    as
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    Keywords

    Household Debt; Counterfactual Decomposition; Demography; Risk Preference and Financial Expectation.;

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