IDEAS home Printed from https://ideas.repec.org/p/bdi/opques/qef_642_21.html
   My bibliography  Save this paper

Liquidity-poor households in the midst of the Covid-19 pandemic

Author

Listed:
  • Mariano Graziano

    (Bank of Italy)

  • David Loschiavo

    (Bank of Italy)

Abstract

The Covid-19 pandemic led to a large and immediate decline in households’ aggregate spending and a surge in bank and postal deposits; although little is known about how this was distributed. This paper overcomes the lack of timely micro-data on households’ liquidity by looking at supervisory data on deposits, introducing a new method to estimate the trend in liquidity distribution and the percentage of liquidity-poor households. We find that in 2020 there was a decrease both in the degree of deposit inequality among Italian households and in the share of liquidity-poor households, alongside government support measures that allowed some households at the bottom of the liquidity ladder to save out of their declining income. The increase in households’ liquidity improved their ability to repay debts and this could help spending patterns to rebound once confidence about the economic outlook is restored. Despite this, households with insufficient liquidity buffers still constitute a large share of population, making their debt repayment capacity dependent on the strength of the economic recovery.

Suggested Citation

  • Mariano Graziano & David Loschiavo, 2021. "Liquidity-poor households in the midst of the Covid-19 pandemic," Questioni di Economia e Finanza (Occasional Papers) 642, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_642_21
    as

    Download full text from publisher

    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2021-0642/QEF_642_21.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
    2. World Bank, 2020. "The COVID-19 Pandemic [Pandémie De Covid-19]," World Bank Publications - Reports 33696, The World Bank Group.
    3. Nicholas Kaldor, 1966. "Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelson and Modigliani," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 33(4), pages 309-319.
    4. Natalie Cox & Peter Ganong & Pascal Noel & Joseph Vavra & Arlene Wong, 2020. "Initial impacts of the pandemic on consumer behavior: Evidence from linked income, spending, and savings data," Working Papers 2020-39, Princeton University. Economics Department..
    5. Marianna Brunetti & Elena Giarda & Costanza Torricelli, 2016. "Is Financial Fragility a Matter of Illiquidity? An Appraisal for Italian Households," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(4), pages 628-649, December.
    6. Cowell, Frank A & Jenkins, Stephen P, 1995. "How Much Inequality Can We Explain? A Methodology and an Application to the United States," Economic Journal, Royal Economic Society, vol. 105(429), pages 421-430, March.
    7. Chow, Gregory C & Lin, An-loh, 1971. "Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series," The Review of Economics and Statistics, MIT Press, vol. 53(4), pages 372-375, November.
    8. Francesca Carta & Marta De Philippis, 2021. "The impact of the COVID-19 shock on labour income inequality: evidence from Italy," Questioni di Economia e Finanza (Occasional Papers) 606, Bank of Italy, Economic Research and International Relations Area.
    9. Michael Batty & Jesse Bricker & Joseph Briggs & Sarah Friedman & Danielle Nemschoff & Eric Nielsen & Kamila Sommer & Alice Henriques Volz, 2021. "The Distributional Financial Accounts of the United States," NBER Chapters, in: Measuring Distribution and Mobility of Income and Wealth, pages 641-677, National Bureau of Economic Research, Inc.
    10. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    11. Natalie Cox & Peter Ganong & Pascal Noel & Joseph Vavra & Arlene Wong & Diana Farrell & Fiona Greig & Erica Deadman, 2020. "Initial Impacts of the Pandemic on Consumer Behavior: Evidence from Linked Income, Spending, and Savings Data," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(2 (Summer), pages 35-82.
    12. Ando,Albert & Guiso,Luigi & Visco,Ignazio (ed.), 1994. "Saving and the Accumulation of Wealth," Cambridge Books, Cambridge University Press, number 9780521452083, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Polina Popova & Maria Semenova & Vladimir Sokolov, 2023. "Covid-19 And Retail Depositor Strategies In Russian Regions: Whether To Withdraw And Why?," HSE Working papers WP BRP 92/FE/2023, National Research University Higher School of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guido Matias Cortes & Eliza C. Forsythe, 2020. "Impacts of the Covid-19 Pandemic and the CARES Act on Earnings and Inequality," Upjohn Working Papers 20-332, W.E. Upjohn Institute for Employment Research.
    2. Katya Kartashova & Xiaoqing Zhou, 2021. "Wealth Inequality and Return Heterogeneity During the COVID-19 Pandemic," Working Papers 2114, Federal Reserve Bank of Dallas.
    3. Lusardi, Annamaria, 1997. "Precautionary saving and subjective earnings variance," Economics Letters, Elsevier, vol. 57(3), pages 319-326, December.
    4. Brunetti, M. & Ciciretti, R. & Djordjevic, Lj., 2016. "The determinants of household’s bank switching," Journal of Financial Stability, Elsevier, vol. 26(C), pages 175-189.
    5. John Gathergood & Fabian Gunzinger & Benedict Guttman-Kenney & Edika Quispe-Torreblanca & Neil Stewart, 2020. "Levelling Down and the COVID-19 Lockdowns: Uneven Regional Recovery in UK Consumer Spending," Papers 2012.09336, arXiv.org, revised Dec 2020.
    6. Hans-Martin von Gaudecker & Radost Holler & Lena Janys & Bettina Sifinger & Christian Zimpelmann, 2020. "Labour Supply during Lockdown and a “New Normal”: The Case of the Netherlands Abstract: We document the evolution of hours of work using monthly data from February to June 2020. During this period, th," ECONtribute Discussion Papers Series 025, University of Bonn and University of Cologne, Germany.
    7. Jonathan A. Parker & Jake Schild & Laura Erhard & David S. Johnson, 2021. "Household Spending Responses to the Economic Impact Payments of 2020: Evidence from the Consumer Expenditure Survey," Economic Working Papers 544, Bureau of Labor Statistics.
    8. Auerbach, Alan & Gorodnichenko, Yuriy & McCrory, Peter B. & Murphy, Daniel, 2022. "Fiscal multipliers in the COVID19 recession," Journal of International Money and Finance, Elsevier, vol. 126(C).
    9. Stefanie Stantcheva, 2022. "Inequalities in the times of a pandemic," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 37(109), pages 5-41.
    10. Vani K. Borooah & Colin Knox, 2015. "The Economics of Schooling in a Divided Society," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-46187-2, December.
    11. Albuquerque, Bruno & Green, Georgina, 2023. "Financial concerns and the marginal propensity to consume in COVID times: Evidence from UK survey data," Journal of Macroeconomics, Elsevier, vol. 78(C).
    12. Zelda Okatch & Abu Siddique & Anu Rammohan, 2013. "Determinants of Income Inequality in Botswana," Economics Discussion / Working Papers 13-15, The University of Western Australia, Department of Economics.
    13. Guillermo Cruces, 2005. "Income Fluctuations, Poverty and Well-Being Over Time: Theory and Application to Argentina," Labor and Demography 0502007, University Library of Munich, Germany.
    14. José González Mínguez & Alberto Urtasun & Miguel Pérez García de Mirasierra, 2020. "Consumption in Spain during the state of alert: an analysis based on payment card spending," Economic Bulletin, Banco de España, issue 3/2020.
    15. Giuseppe Albanese & Guglielmo Barone & Guido de Blasio, 2023. "The impact of place‐based policies on interpersonal income inequality," Economica, London School of Economics and Political Science, vol. 90(358), pages 508-530, April.
    16. Granja, João & Makridis, Christos & Yannelis, Constantine & Zwick, Eric, 2022. "Did the paycheck protection program hit the target?," Journal of Financial Economics, Elsevier, vol. 145(3), pages 725-761.
    17. Georgij Alekseev & Safaa Amer & Manasa Gopal & Theresa Kuchler & J. W. Schneider & Johannes Stroebel & Nils Wernerfelt, 2023. "The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees," Management Science, INFORMS, vol. 69(1), pages 7-24, January.
    18. Pongpitch Amatyakul & Panchanok Jumrustanasan & Pornchanok Tapkham, 2023. "What can 20 billion financial transactions tell us about the impacts of Covid-19 fiscal transfers?," BIS Working Papers 1130, Bank for International Settlements.
    19. Guido Matias Cortes & Eliza Forsythe, 2023. "Distributional impacts of the Covid-19 pandemic and the CARES Act," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(2), pages 325-349, June.
    20. Martin O'Connell & Áureo de Paula & Kate Smith, 2021. "Preparing for a pandemic: spending dynamics and panic buying during the COVID‐19 first wave," Fiscal Studies, John Wiley & Sons, vol. 42(2), pages 249-264, June.

    More about this item

    Keywords

    liquidity; distribution; financial poverty;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdi:opques:qef_642_21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bdigvit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.