Household Wealth and Resilience to Financial Shocks in Italy

27 Pages Posted: 1 Oct 2018

See all articles by Daniel Garcia-Macia

Daniel Garcia-Macia

International Monetary Fund (IMF) - European Department

Date Written: August 2018

Abstract

High household wealth is often cited as a key strength of the Italian economy. Both in absolute terms and relative to income, the Italian household sector is wealthier than most euro area peers. A sizable fraction of this wealth is held by the rich and upper middle classes. This paper documents the changes in the Italian household sector's financial wealth over the past two decades, by constructing the matrix of bilateral financial sectoral exposures. Households became increasingly exposed to the financial sector, which in turn was exposed to the highly indebted real and government sectors. The paper then simulates different financial shocks to gauge the ability of the household sector to absorb losses. Simple illustrative calculations are presented for a fall in the value of government bonds as well as for bank bail-ins versus bailouts.

Keywords: Flow of funds, Household consumption, Wealth distribution, Bonds, Bank bailouts, Balance sheets, External shocks, financial linkages, balance sheet analysis, bail-in, bailout, Portfolio Choice

JEL Classification: G11, G32, G33

Suggested Citation

Garcia-Macia, Daniel, Household Wealth and Resilience to Financial Shocks in Italy (August 2018). IMF Working Paper No. 18/196, Available at SSRN: https://ssrn.com/abstract=3257362

Daniel Garcia-Macia (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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