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

Author

Listed:
  • Bover, Olympia
  • Du Caju, Philip
  • Villanueva, Ernesto
  • Costa, Sónia
  • McCarthy, Yvonne
  • Casado, Jose Maria
  • Tzamourani, Panagiota
  • Sierminska, Eva
  • Zavadil, Tibor
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 secured debt, the amount of secured debt held and 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. Adjusting for household composition, we find substantial cross-country variation in secured debt outcomes and in their distribution across age and income groups. Among all the institutions considered, the length of asset repossession periods best accounts for the differences across countries in 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 fixed-rate mortgages deliver less robust results.

Suggested Citation

  • Bover, Olympia & Du Caju, Philip & Villanueva, Ernesto & Costa, Sónia & McCarthy, Yvonne & Casado, Jose Maria & Tzamourani, Panagiota & Sierminska, Eva & Zavadil, Tibor, 2015. "The Distribution of Debt Across Euro Area Countries: The Role of Individual Characteristics, Institutions and Credit Conditions," CEPR Discussion Papers 10934, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10934
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    More about this item

    Keywords

    Fixed rate mortgages; Household debt and interest rate distributions; Loan-to-value ratios; Taxation; Time to foreclose;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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