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Household Response to the Economic Crisis Micro-simulation for the Czech Economy

Author

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  • Petr Jakubík

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 Czech economy. As a result of the lack of individual data on the Czech household finances, micro data are simulated. Our analysis clearly points out that there is a significant additional decline in consumption related to an increase in household default rates. We find that potential household insolvencies have important implications for the financial system as well as for the aggregate economy.

Suggested Citation

  • Petr Jakubík, 2010. "Household Response to the Economic Crisis Micro-simulation for the Czech Economy," IFC Working Papers 6, Bank for International Settlements.
    • Handle: RePEc:bis:bisiwp:6
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    References listed on IDEAS

    as
    1. Barrell, Ray & Davis, E. Philip & Pomerantz, Olga, 2006. "Costs of financial instability, household-sector balance sheets and consumption," Journal of Financial Stability, Elsevier, vol. 2(2), pages 194-216, June.
    2. Barry, F. & Bradley, J. & Kejak, M. & Vavra, D., 2000. "The Czech Economic Transition: Exploring Options Using a Macrosectoral Model," Papers 00/3, College Dublin, Department of Political Economy-.
    3. Merxe Tudela & Garry Young, 2005. "The determinants of household debt and balance sheets in the United Kingdom," Bank of England working papers 266, Bank of England.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    credit cycle; households’ distress; insolvency; household default; aggregate consumption;
    All these keywords.

    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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