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Is financial fragility a matter of illiquidity? An appraisal for Italian households

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  • Marianna Brunetti
  • Elena Giarda
  • Costanza Torricelli

Abstract

In this paper we investigate household financial fragility and assess the role played by the composition of the household portfolio besides standard determinants of this condition (e.g. income, indebtedness, age, gender, financial literacy). We take the case of Italy, given the very peculiar portfolio composition (high level of housing and low level of indebtedness and portfolio diversification) and provide two main contributions. First, we propose a novel definition of financial fragility. Second, based on this new measure, we use data from the 1998-2010 Bank of Italy Survey on Household Income and Wealth to investigate the determinants of this condition. Our results confirm most usual markers of financial fragility and additionally highlight the role of homeownership, which is not related to the presence of mortgages but it is rather connected to specific socio-demographic features such as age and marital status.

Suggested Citation

  • Marianna Brunetti & Elena Giarda & Costanza Torricelli, 2012. "Is financial fragility a matter of illiquidity? An appraisal for Italian households," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0032, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    • Handle: RePEc:mod:wcefin:0032
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    as
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    More about this item

    Keywords

    financial fragility; household portfolios; housing;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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