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A Microsimulation Model to evaluate Italian Households Financial Vulnerability

Author

Listed:
  • Valentina Michelangeli

    (Bank of Italy, Financial Stability Directorate, Via Nazionale, 91, 00184 Roma)

  • Mario Pietrunti

    (Institute Bank of Italy, Financial Stability Directorate, Via Nazionale, 91, 00184 Roma)

Abstract

We build a microsimulation model to monitor the financial vulnerability of Italian households. Starting from household-level data from the Survey on Household Income and Wealth and matching them with macroeconomic forecasts on debt and income, we project the future path of households indebtedness and debt-service ratio. This allows us to assess households vulnerability at a higher frequency and in a more timely manner than by using household data alone. We find that the share of vulnerable households (defined as those with a debt-service ratio below 30 per cent and income below the median) over the total population is projected to be about stable between 2012 and 2014, with a slight decrease in 2015 due to positive income growth. Their debt is also projected to decrease in those years. Overall, we find that the dynamics of income growth are the main driver of households vulnerability.

Suggested Citation

  • Valentina Michelangeli & Mario Pietrunti, 2014. "A Microsimulation Model to evaluate Italian Households Financial Vulnerability," International Journal of Microsimulation, International Microsimulation Association, vol. 7(3), pages 53-79.
    • Handle: RePEc:ijm:journl:v:7:y:2014:i:3:p:53-79
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    References listed on IDEAS

    as
    1. Tullio Jappelli & Luigi Pistaferri, 2010. "Does Consumption Inequality Track Income Inequality in Italy?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 133-153, January.
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    3. Roberto Felici & Elisabetta Manzoli & Raffaella Pico, 2012. "Crisis and Italian households: a microeconomic analysis of mortgage contracts," Questioni di Economia e Finanza (Occasional Papers) 125, Bank of Italy, Economic Research and International Relations Area.
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    More about this item

    Keywords

    households vulnerability; debt; stress test;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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