The Distribution of Debt Across Euro Area Countries: The Role of Individual Characteristics, Institutions and Credit Conditions

92 Pages Posted: 21 Jun 2016

See all articles by Olympia Bover

Olympia Bover

Banco de España - Research Department; Centre for Economic Policy Research (CEPR)

Jose Maria Casado

Banco de España

Sonia Costa

Bank of Portugal

Philip Du Caju

National Bank of Belgium

Yvonne McCarthy

Central Bank of Ireland

Eva Sierminska

LISER; DIW Berlin - German Socio-Economic Panel Study (SOEP); IZA Institute of Labor Economics

Panagiota Tzamourani

Deutsche Bundesbank

Ernesto Villanueva

Banco de España - Research Department

Tibor Zavadil

Národná banka Slovenska

Multiple version iconThere are 5 versions of this paper

Date Written: 2014

Abstract

The aim of this paper is twofold. First, we present an up-to-date assessment of the differences across euro area countries in the distributions of various measures of debt conditional on household characteristics. We consider three different outcomes: the probability of holding debt, the amount of debt held and, in the case of secured debt, the interest rate paid on the main mortgage. Second, we examine the role of legal and economic institutions in accounting for these differences. We use data from the first wave of a new survey of household finances, the Household Finance and Consumption Survey, to achieve these aims. We find that the patterns of secured and unsecured debt outcomes vary markedly across countries. Among all the institutions considered, the length of asset repossession periods best accounts for the features of the distribution of secured debt. In countries with longer repossession periods, the fraction of people who borrow is smaller, the youngest group of households borrow lower amounts (conditional on borrowing), and the mortgage interest rates paid by low-income households are higher. Regulatory loan-to-value ratios, the taxation of mortgages and the prevalence of interest-only or fixed-rate mortgages deliver less robust results.

Keywords: Household debt and interest rate distributions, Time to Foreclose, Taxation, Loanto-Value ratios, Fixed rate mortgages, Financial literacy

JEL Classification: D14, G21, G28, K35

Suggested Citation

Bover, Olympia and Casado, Jose Maria and Costa, Sonia and Du Caju, Philip and McCarthy, Yvonne and Sierminska, Eva and Tzamourani, Panagiota and Villanueva, Ernesto and Zavadil, Tibor, The Distribution of Debt Across Euro Area Countries: The Role of Individual Characteristics, Institutions and Credit Conditions (2014). Bundesbank Discussion Paper No. 01/2014, Available at SSRN: https://ssrn.com/abstract=2796955

Olympia Bover (Contact Author)

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain
+34 91 338 5979 (Phone)
+34 91 338 5678 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Jose Maria Casado

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Sonia Costa

Bank of Portugal ( email )

Rua Francisco Ribeiro, 2
Lisbon, 1150-165
Portugal

Philip Du Caju

National Bank of Belgium ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

Yvonne McCarthy

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Eva Sierminska

LISER ( email )

3, avenue de la Fonte
Esch-sur-Alzette, L-4364
Luxembourg

HOME PAGE: http://www.sierminska.eu

DIW Berlin - German Socio-Economic Panel Study (SOEP)

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Panagiota Tzamourani

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Ernesto Villanueva

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain

Tibor Zavadil

Národná banka Slovenska ( email )

Imricha Karvasa 1
813 25 Bratislava
Slovakia

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