A0579
Title: Financial fragility across Europe: Is it the household or the country that matters?
Authors: Marianna Brunetti - University of Rome Tor Vergata (Italy) [presenting]
Costanza Torricelli - University of Modena and Reggio Emilia (Italy)
Elena Giarda - Prometeia (Italy)
Abstract: Households' financial fragility is investigated in twelve European countries to assess whether international differences are a matter of household characteristics and/or of country features. Financial fragility is characterized by having no income constraints yet holding insufficient liquid assets to face unexpected expenses. The estimation results show that the metric is able to capture difficulties other than those related to debt and income and highlight the relevance of accounting for household portfolio decisions. Specifically, an illiquid portfolio increases the likelihood of financial fragility, while this is not the case for indebtedness. Relevant differences among countries are observed in terms of both the estimated average likelihood of financial fragility and its main determinants. The decomposition of these differences by means of counterfactual methods shows that they are primarily due to household characteristics, which drive all the countries towards higher financial fragility with respect to Germany (the reference country), while the economic-institutional setup is nearly able to compensate for this in one country only.
