186 2021, XXIV, 3
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10.15240/ ul/001/2021-3-011
DETERMINANTS OF HOUSEHOLD
FINANCIAL VULNERABILITY: EVIDENCE
FROM SELECTED EU COUNTRIES
Nikola Šubo á1, Ladisla Mu a2, Ján Buleca3
1 Technical Uni e si y o Košice, Facul y o Economics, Depa men o Finance, Slo akia, ORCID: 0000-0003-0158-2332,
[email p o ec ed];
2 Pan-Eu opean Uni e si y, Facul y o Economics and Business, Depa men o In e na ional En ep eneu ship,
Slo akia, ORCID: 0000-0002-2453-8740, ladisla [email p o ec ed];
3 Technical Uni e si y o Košice, Facul y o Economics, Depa men o Finance, Slo akia, ORCID: 0000-0002-6613-2167,
[email p o ec ed] (co esponding au ho ).
Abs ac : Household deb has been inc easing in he las decades, and i poses a h ea no
only o he inancial s abili y o households bu is a p ecu so o he economic and inancial c isis.
A down u n caused by he co ona i us pandemic is expec ed o deepening inequali ies, mainly due
o he inabili y o households o epay exis ing deb s o inance basic li ing needs. Unde s anding
he de e minan s o household indeb edness and inancial ulne abili y is c ucial o policymake s
who p ocess measu es o p e en inc easing household indeb edness. This pape in es iga es
he de e minan s o household inancial ulne abili y in eu o a ea coun ies using he Household
Finance and Consump ion Su ey mic o-da ase collec ed by he Eu opean Cen al Bank. The
quan i a i e app oach was applied using o dina y leas squa e and quan ile es ima ion p ocedu es.
The di e ence be ween OLS and quan ile es ima ions showed he app op ia eness o using he
quan ile eg ession app oach. Pe o mance analysis p o ed ha only he numbe o elde ly and
he alue o weal h and exis ence o mo gage in e es ax elie s a is ically signi ican a ec s he
le el o ulne abili y in all h ee wa es. While he inc easing numbe o elde ly and g ea e alue
o household weal h lowe s he ulne abili y, he e ec o mo gage in e es ax elie di e s ac oss
indi idual wa es. All o he used ac o s a e essen ial and s a is ically signi ican o he inancial
ulne abili y o households as well, bu he impo ance and signi icance could di e ac oss he
dis ibu ion and indi idual wa es. The e ec o inancial asse s, educa ion, and employmen we e
ound o be nega i e in all obse a ions o all wa es. On he o he hand, he numbe o child en and
he alue o households’ eal asse s is associa ed wi h inc eased inancial ulne abili y indica o s.
Keywo ds: Household, ulne abili y, indeb edness, eg ession analysis.
JEL Classi ica ion: C21, D14, G51.
APA S yle Ci a ion: Šubo á, N., Mu a, L., & Buleca, J. (2021). De e minan s o Household
Financial Vulne abili y: E idence om Selec ed EU coun ies. E&M Economics and
Managemen , 24(3), 186–207. h ps://doi.o g/10.15240/ ul/001/2021-3-011
In oduc ion
The inancial c isis o 2007/2008, known as he
global inancial c isis, caused by a combina ion
o an asse p ice bubble in he eal es a e
sec o and a c edi bubble leading o excessi e
le e age, highligh ed he impo ance o he
household sec o o inancial s abili y o he
whole economy. Easy o ge a loan and he
belie ha he house p ices would app ecia e
encou aged mo e bo owe s o ge in o deb .
Ame ican households and inancial ins i u ions
became deeply indeb ed. A he end o 2007,
Ame ican households’ o al loans and deb
secu i ies ela i e o he GDP was 98.55%
(In e na ional Mone a y Fund, 2020). Mo gage
de aul s caused by he inancial c isis a ec ed
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inancial s abili y also in Eu opean coun ies.
The household sec o can in luence he
economy mainly due o i s size and posi ion
on he inancial ma ke s, bu on he o he
hand, he economic si ua ion o households is
also a ec ed by a ious social, economic, and
poli ical changes. High inancial ulne abili y
and high le el o household deb a e p ecu so s
o c isis ha esul in a g owing in e es in
analysing he inancial si ua ion, isk p o ile,
and s abili y o households.
Financial ulne abili y is he s a us o
inancial ins abili y, in which households a e
exposed o a ious inancial isks and shocks
(Lee & Sab i, 2017). Financial ulne abili y
is also ep esen ed as he po e y o asse s
o lowe weal h accumula ion, leading o he
inabili y o cope wi h unexpec ed si ua ions
such as unemploymen , illness, o highe
housing- ela ed expenses (Abid & Sha iai,
2018; Noe hidaja i e al., 2021).
Vulne able households do no pose a isk
only o he economy bu also o hemsel es due
o se e al easons. Lack o inancial s abili y,
inabili y o inance consump ion and a highe
le el o indeb edness a ec u u e well-being
and psychological ea u es o household
membe s as well. In connec ion wi h ensu ing
inancial s abili y and lowe ing he ulne abili y
o households, pe sonal inancial managemen
is conside ed he mos signi ican p oblem.
Managing esou ces and gaining con ol o e
he inancial si ua ion allow indi iduals o assess
he inancial si ua ion o he en i e household
(T eano , 2016; Lee & Sab i, 2017).
The mos common indica o o household
inancial ulne abili y is household deb used o
calcula e a ious ulne abili y measu emen s
(deb - o-asse a io, deb - o-income a io, deb
se ice- o-income a io). Household deb in he
eu o a ea e alua ed by he g oss deb - o-income
a io has luc ua ed in he las decade. I eached
he highes le el in 2010 (98.79%). F om his yea ,
he eu o a ea household deb has dec eased by
5.11%. The highes alue o he g oss deb - o-
income a io was epo ed in Denma k (214.16%)
and Cyp us (134.18%), while he lowes alue o
his indica o was eco ded in Romania (24.00%),
Hunga y (33.31%), and La ia (32.19%) in 2019.
The g oss deb - o-income a io o he Slo ak
households has isen om 30.87% in 2007 o
69.64% in 2019 (Eu os a , 2019).
The massi e inc ease o household deb
o e he las decades could be pa ially a ibu ed
o he in oduc ion o he economic and mone a y
union ha caused a con e gence o coun ies’
in e es a es joined in he Eu ozone. The
common cu ency Eu o elimina ed he exchange
a e isk and made loans mo e a ailable
(Yildi im, 2015; Nölke, 2016). Nowadays, he
h ea o household indeb edness inc eases as
he economic c isis caused by he co ona i us
is expec ed o deepen inequali ies due o he
inabili y o epay exis ing deb and o inance basic
li ing needs. Two yea s be o e he pandemic hi ,
one o h ee EU households could no handle
unexpec ed expenses, while sa ings o many
households we e equi alen o jus a ew weeks
o basic consump ions (Deme izs e al., 2020).
As he c isis o las yea has led o subs an ial
educ ions in ea nings, i has u he educed
he abili y o households o inance unexpec ed
expendi u es (Midões & Se é, 2020).
Mo eo e , one o he main ools o educing
inancial ulne abili y is a su icien le el o liquid
inancial asse s, especially sa ings ha can be
used as an income eplacemen . Compa ed
o U.S. households, Eu opean households
ha e ewe inancial asse s, and i also
con ibu es o he impo ance o ulne abili y
analysis (Eu os a , 2021; S a is a, 2021). F om
a p ac ical poin o iew, household inancial
s abili y is essen ial o de eloped coun ies
as i ep esen s one o he h ea s o economic
eco e y om he economic c isis. To ale
households o isk ac o s and ake p e en i e
measu es sui able o di e en households,
i is necessa y o know wha has he mos
signi ican impac on ulne abili y. The e o e,
he e is a ques ion abou which ac o s deepen
he inancial ulne abili y he mos and whe he
i changes a a ious le els o indeb edness.
The submi ed pape aims o iden i y socio-
demog aphic de e minan s o indeb edness
aising he household inancial ulne abili y in
selec ed EU coun ies. The pape also analyses
how he implemen ed mac op uden ial policies
ansla e in o di e en le els o household
inancial ulne abili y indica o . The s udy esul s
can help na ional and in e na ional au ho i ies
de e mine which household cha ac e is ics
and household heads need o be suppo ed o
educe inancial ulne abili y. Fu he mo e, he
conduc ed s udy helps o answe he ollowing
esea ch ques ions:
 Wha a e he key demog aphic and social
ac o s a ec ing he le el o households’
inancial ulne abili y?
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 Wha e ec do di e en implemen ed
mac op uden ial policies ha e on he le el
o households’ inancial ulne abili y?
1. Backg ound
Households a e ulne able due o se e al
easons. The mos c i ical ac o s a ec ing
inancial s abili y and ulne abili y a e socio-
demog aphic, economic cha ac e is ics
(income, sol ency, age, he le el o educa ion,
household size, ma i al s a us, inancial
beha iou , and sol ency), and pe sonal
cha ac e is ics ( isk ole ance, inancial li e acy)
o each membe in he household (Rahim,
2011; Ca he ine e al., 2016; Daud e al., 2018;
Walugemde e al., 2019). Households’ socio-
demog aphic cha ac e is ics such as age,
household size, numbe o child en, gende , and
educa ion d i e ulne abili y o ces. To mi iga e
he inancial ulne abili y o households and i s
consequences, he numbe o s udies analysing
he de e minan s o ulne abili y has inc eased.
In addi ion, conside able a en ion is pu o
inancial ulne abili y using a ious econome ic
me hods and ulne abili y measu emen s.
Household membe s acqui e inancial
managemen skills a an ea ly age. They a e
su ounded by di e en social g oups and
occasionally y o imi a e he consump ion
habi s and li ing s anda ds o hei neighbou s,
colleagues, and people a ound hem e en hey
ha e lowe income. Households ha canno
co e hei consump ion a e mo e indeb ed,
bu hey a e mo e likely o be unable o pay o
hei deb s and expose hemsel es o inancial
ins abili y. Inc easing income inequali y igge s
deb - inanced consump ion, leads o deb
accumula ion, and inc eases households’
inancial ulne abili y (Wildaue , 2016).
Young people usually se up hei
households; hey a e d i en by ma e ialism and
bo ow ea ly. I leads o deb accumula ion and
h ea s o inancial s abili y. The e ec o age on
deb is nega i e because olde people usually
spend less and do no co e hei consump ion
by deb . I is con i med in he s udies using
simple eg ession and mul ile el mixed-e ec
linea eg ession (Danzige e al., 1982; Haq
e al., 2018). The inancial ulne abili y o
households dec eases wi h he inc easing age
(G ejcz & Żółkiewski, 2017; Azzopa di e al.,
2019).
Con a y o his, ano he c oss-coun y
analysis o households’ inancial ulne abili y
and i s de e minan s based on he es ima ion
o a linea eg ession equa ion showed ha
young people a e mo e suscep ible o po en ial
ulne abili y (Daud e al., 2018). Howe e ,
a highe deb o households wi h young
membe s is no as ala ming as he indeb edness
o he elde ly ha Modigliani’s Li e Cycle
Income Hypo hesis desc ibes. Acco ding o his
hypo hesis, he income o indi iduals inc eases
o e he li e cycle un il i eaches he maximum
in midli e. I is associa ed wi h mo e signi ican
sa ings (Modigliani, 1986). On he o he hand,
he income o olde people usually dec eases.
Wi hou e ec i e pension sys ems, insu ance
plans, and suppo sys ems, hey canno epay
deb s ha pose a isk no only o hei inancial
s abili y bu also o he s abili y o inancial
ins i u ions.
Household size and he numbe o child en
also ha e a no iceable e ec on he demand
o loans, bu i can be seen indi ec ly h ough
li ing expenses. Analysing mic o inance
and household’s access o c edi by p obi
modelling in he s udy o Togba (2012) showed
ha households wi h mo e membe s ha e
highe expenses, and he e o e he e is
a highe p obabili y o applying o a loan
o und hei consump ion. A s udy using
a quan ile eg ession app oach o de e mine
he cha ac e is ics o households’ sa ing a e
explains ha child en a e usually e e ed
o as indica o s o household dependency.
As a esul , households wi h mo e child en
spend mo e and sa e less (Hua & E eyge s,
2019). A s udy de e mining he cha ac e is ics
o household o e -indeb edness showed ha
he inancial s abili y o households depends
on he gende o he household head, and he
inancial beha iou o men and women can
di e . Female-headed households a e usually
mo e indeb ed, explained by he lowe age o
e i emen , uns able and lowe a e age income,
and esponsibili y o bea ing child en. Al hough
deb - o-income a ios a e usually much mo e o
male-headed households, emales wi h loans
a e mo e likely o be o e -indeb ed and unable
o epay he exis ing loan (N salaze & Ikhide,
2016). On he o he hand, women a e usually
mo e isk-a e se he e o e p e e in es men s
in sa e , lowe -yield asse s ha lowe hei
inancial ulne abili y (Killewald e al., 2018).
Ano he socio-demog aphic ac o essen ial
o he inancial s abili y o households is
he le el o educa ion. Highe le els o
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educa ion and inancial li e acy lowe inancial
ulne abili y because i imp o es inancial
knowledge and skills. I is associa ed wi h
a be e unde s anding o he di e en
inancial p oduc s and has dec eased inancial
ulne abili y. Financial li e acy and sel -con ol
in luence he le el o unsecu ed deb o e ed by
non-banking ins i u ions, and i is also e lec ed
in inancial ulne abili y indica o s (S i e al.,
2020). Households wi h he lowe educa ional
a ainmen o each membe a e mo e indeb ed
and end o ail in deb epaymen (Azzopa di
e al., 2019).
On he o he hand, he households wi h
a highe le el o educa ion ha e be e inancial
managemen and lowe inancial ulne abili y
and inancial agili y (Noe hidaja i e al., 2021;
Yuso e al., 2015). Ano he s udy analysing
measu emen s and de e minan s o household
inancial ulne abili y by he ac ional logi
es ima ion echnique explains ha educa ional
le els p edic he abili y o a household o
manage inancial esou ces. Educa ional
a ainmen is also essen ial in he sa ings
p ocess. Subjec s wi h lowe educa ional
a ainmen end o sa e less. On he o he hand,
mo e signi ican sa ings o indi iduals wi h
highe educa ion help o e come unexpec ed
economic si ua ions and main ain inancial
s abili y (B ounen e al., 2016).
A s udy by Sachin e al. (2018) explains
ha inancial ulne abili y is in luenced by
inancial de e minan s such as asse s, weal h,
and income. An asse is nega i ely associa ed
wi h he le el o inancial ulne abili y while i is
a quick sou ce o income mainly in unexpec ed
si ua ions, bu only a speci ic ype o asse s
leads o he lowe inancial ulne abili y. Fo
example, sa ings a e quickly mone isable
asse s, and he e o e hey could be used as an
income eplacemen . On he o he hand, he
e ec o buildings and land asse s owne ship
is no con i med while hey a e high illiquid, and
i is ha d o use hese asse s immedia ely in
an unexpec ed si ua ion. I is explained in he
s udy using desc ip i e esea ch in analysing
spending pa e ns and hei e ec s on inancial
ulne abili y. Financial ulne abili y is d i en by
low weal h as well. Weal h accumula ion helps
build eme gency unds ha can help make
a s ess ul economic si ua ion easie o handle.
Basic mic oeconomic heo y sugges s ha
highe income dec eases inancial ulne abili y,
bu esea ch pape s’ esul s can be wo old.
Fi s ly, i is in line wi h he s udy sugges ing
ha he income le el is nega i ely associa ed
wi h household ulne abili y while highe
income allows indi iduals o abso b ad e se
shocks such as inc easing in la ion o illness
(Noe hidaja i e al., 2021). Addi ionally, i some
household membe s lose hei jobs, hey
lose hei income, and he e o e hey smoo h
consump ion by bo owing (Kuk, 2017). On
he o he hand, ano he s udy examining he
household indeb edness and inancial well-
being by O dina y Leas Squa e Reg ession
con i med ha highe income causes g ea e
indeb edness. Thus, i inc eases ulne abili y
h ough highe access o deb (Handayani e
al., 2016).
Se e al s udies poin ed o he e ec
o mac oeconomic ac o s impo an o
household ulne abili y. The mos conside able
mac oeconomic ac o s a ec ing ulne abili y
a e in e es a es, le el o unemploymen , and
house p ices, bu he le el o indeb edness
depends on he mac op uden ial policy.
Reg ession analysis o he household
deb , mac oeconomic undamen als, and
household cha ac e is ics indica ed ha
g ea e unemploymen , in e es a es, and
inc easing house p ices e lec he highe
ulne abili y o households (Ca he ine e al.,
2016; Pa elka & Tomas, 2016). The posi i e
e ec o unemploymen and in e es a es on
ulne abili y is also con i med by analysing
de e minan s o household deb based on he
au o eg essi e dis ibu ed lag modelling and
O dina y Leas Squa e (Abid & Sha iai, 2018;
Azmin e al., 2019). The le el o household
indeb edness and ulne abili y migh depend on
he coun y households li e in and i s policies.
Some coun ies (Belgium, he Czech Republic,
Denma k, Es onia, Finland, I aly, Luxembou g,
he Ne he lands, Sweden) p o ide a mo gage
in e es ax elie ha allows homeowne s
o deduc hei in e es on a loan. Highe ax
deduc ion inc eases he demand o deb
(Bo e e al., 2016). Many s udies con i med
ha mo gage in e es ax elie encou ages
people o buy la ge homes and commi o
la ge mo gages (Alpanda & Zabai y, 2017;
G ube e al., 2017). In he case o he ax
deduc ion aboli ion, he e is an immedia e
educ ion in in es men in housing by a ound
6.00%. As a esul , i is subsequen ly e lec ed
in indica o s o household indeb edness and
inancial s abili y (Keigh ley, 2020).
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Mo eo e , a ious coun ies ha e se
di e en limi s on loan- o- alue a ios (LTV). An
inc ease in LTV leads o a highe demand o
secu ed deb , mainly o young and low-income
households, because hey may inance hei
p ope y almos en i ely by deb (Ba ios e al.,
2019). Ano he s udy explains ha households
holding loans wi h a lowe LTV a e conside ed
less ulne able due o con inued abili y o epay
exis ing loans e en in a decline in p ope y
p ices (Bilyk e al., 2017).
Rela ed o he de ini ion o household
inancial ulne abili y, a ious measu emen s
o ulne abili y can be used. The mos common
indica o o ulne abili y is he deb se ice- o-
income a io gi en by he sha e o obliga ed
deb paymen s and disposable income
(Ampudia e al., 2015). Au ho s o o he s udies
use he deb - o-income a io and deb - o-asse
a io o measu e he inancial ulne abili y
o households (Fessle e al., 2017; Leika &
Ma che ini, 2017). These measu es o inancial
ulne abili y used a ious h esholds o de ine
a household as ulne able. Fo example,
Te aneo (2018), and Fessle e al. (2017) se
he h eshold le el o deb - o-asse a io a
75%, o deb - o-income a io a h ee imes
and deb se ice- o-income a io a 40%. The
au ho s a gue ha households wi h indica o s
abo e hese alues a e no in de aul a
p esen , bu he e is a g ea e p obabili y o
ha ing di icul ies in he u u e.
2. Da a Desc ip ion
P esen ed analysis used he Household
Finance and Consump ion Su ey (HFCS) da a,
con aining in o ma ion on socio-demog aphic
a iables, asse s, liabili ies, income,
consump ion, and household inancial si ua ion
and economic beha iou . I is conduc ed in
he Eu ozone membe s a es om 2010/ea ly
2011 e e y h ee yea s. HFCS is coo dina ed
by he Eu opean Cen al Bank (ECB), and in
each coun y, i is ca ied ou by he Na ional
Cen al Bank. The esponden sample size was
inc easing in each wa e: 62,000 households
(15 coun ies) in HFCS 1; 84,600 households
(20 coun ies) in HFCS 2; and he o al sample
size o he HFCS da a om he hi d wa e we e
91,200 households (22 coun ies) (Eu opean
Cen al Bank, 2016b).
The da ase is based on me hodological
p inciples, ensu ing he compa abili y o esul s
in a ious Eu opean coun ies (Eu opean
Cen al Bank, 2016a). A speci ic me hodological
aspec o he da a is he use o Bayesian-based
mul iple impu a ions ha helps o ackle he
issue o non- esponse. The impu a ion p ocess
esul s in i e e sions o da a and helps o
p ese e he cha ac e is ics o he dis ibu ion
and he ela ionships be ween di e en
a iables. Mo eo e , o ensu e he sample’s
ep esen a i eness, HFCS used a se o
popula ion weigh s as well, and he sum o he
es ima ion weigh s equals he o al numbe o
households in he coun y. The Na ional Banks
calib a ed he weigh s based on he numbe
o households wi h 1, 2, 3 o mo e membe s,
he numbe o men and women, di e en age
g oups in each egion, and dis ibu ion o he
popula ion acco ding o he economic ac i i y
(Eu opean Cen al Bank, 2016b).
Speci ic limi s o HFCS e lec s i s c oss-
sec ional basis, so he sample o in e iewed
households can di e ac oss he wa es. I is
essen ial o ake his ea u e in o accoun mainly
when in e p e ing changes in he cha ac e is ics
o speci ic g oups o households. Mo eo e , he
HFCS sample does no ha e a panel s uc u e
as a whole. I should be highligh ed ha i is
no easible o d aw any conclusions on he
economic pe o mance o he same households
ac oss he indi idual wa es (Eu opean Cen al
Bank, 2020). E e y wa e o he su ey has
a di e en coun y base as well. The lis o
coun ies ha pa icipa ed in he indi idual
wa es o he HFCS is a ached in he Appendix
(Tab. A1). The alues o asse s and liabili ies
a e ob ained by sel -assessmen , bu hey use
suppo i e documen a ion such as accoun
s a emen s o ax e u ns. This s ep o da a
collec ion is conside ed a delibe a e choice,
gi en he goal o using he su ey o s udy he
beha iou o indi idual households (Eu opean
Cen al Bank, 2021). Despi e men ioned
limi a ions o HFCS, i is he only ha monised
se o da a based on households’ balance
shee s which p o ide de ailed household-le el
in o ma ion on weal h o he en i e household
popula ion ac oss he EU coun ies (Fessle &
Schü z, 2018; Te aneo, 2018).
The app oach o analyse he de e minan s
o household inancial ulne abili y includes he
ollowing household cha ac e is ics:
Household ulne abili y: To measu e he
household inancial ulne abili y, he a io
be ween o al mon hly deb paymen s and
household g oss mon hly income was used.
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The g ea es mean ulne abili y o households
in he HFCS wi h he alue o 170.30%
was eco ded in he hi d wa e. The mean
ulne abili y o households had dec eased
be ween he i s and he second wa e om
133.60% o 128.18%. The median ulne abili y
was lowe han he mean and was dec easing
he whole analysed pe iod, om 13.00% in he
i s wa e o 12.30% in he second and 11.00%
in he hi d wa e.
P esence o he elde ly: The a iable
p esence o he elde ly p o ides in o ma ion
abou he numbe o household membe s
aged 65 yea s o mo e li ing in one household.
Mos membe s olde han 65 yea s li ing in
one household we e eco ded in he i s wa e
(5 membe s), while in he second and hi d
wa e, no mo e han i e membe s aged 65 and
mo e li ed unde he same oo .
Child en: All dependen pe sons aged 0–15
and pe sons aged 16–24 do no wo k and
always li e wi h a pa en – he mos dependen
child en (13) li ing in one household in he
i s wa e. The a e age numbe o dependen
child en was dec easing in all h ee wa es. On
he o he hand, numbe o households wi hou
child en inc eased om 65.91% in he i s o
68.81% in he second and 70.22% in he hi d
wa e.
Educa ion: Va iable in o ms abou he
highes comple ed educa ion o he e e ence
pe son. HFCS uses Canbe a ISCED
classi ica ion, and in his s udy, six s ages
o ISCED classi ica ion a e agg ega ed in o
ou ca ego ies. The i s ca ego y includes no
o mal/below ISCED 1 educa ion and p ima y
educa ion, he second lowe seconda y and
second s age o p ima y educa ion. The
hi d ca ego y ob ains uppe seconda y and
pos -seconda y educa ion, while he ou h
ep esen s e ia y and highe educa ion. In all
h ee wa es, he mos e e ence pe sons ha e
uppe seconda y educa ion, while households
wi hou educa ion had he smalles sha e.
Gende : I is a dummy a iable equal o 1 i
he e e ence pe son is men, o he wise = 0. In
all h ee wa es, he sha e o men in a posi ion o
e e ence pe son was almos wo imes highe
han he sha e o women.
Employmen : Numbe o household
membe s ha a e cu en ly employed. The
mos signi ican sha e had households wi hou
any employed household membe s in all
h ee wa es. The mean numbe o employed
household membe s was 0.97 in he i s , 0.95
in he second, and 0.98 in he hi d wa e, while
he median numbe was equal o one in all
h ee su eys.
Real asse s: Real asse s o households
ep esen s he alue o o al eal asse s,
including he p ima y esidence, ehicles,
aluables, and business asse s exp essed
in eu os. The a e age alue o a household’s
eal asse s was he highes in he i s wa e,
467,539.26 eu os. On he con a y, he lowes
a e age alue was 337,854.39 eu os eco ded
in he hi d wa e.
Financial asse s: Financial asse s include
he alue o deposi s, mu ual unds, bonds,
sha es, and money owed o households
exp essed in eu os. The a e age alue o
a household’s inancial asse s was dec easing
he whole h ee wa es, om 119,535.63 eu os
in he i s o 98,999.30 eu os in he hi d wa e.
Weal h: Va iable weal h exp ess o al
household asse s minus o al ou s anding
household liabili ies in eu os. The mos signi ican
a e age household weal h was in he second
wa e (425,714.74 eu os). The lowes a e age
weal h o households was eco ded in he hi d
wa e, 208,208.40 eu os. The lowes median
weal h o households ha pa icipa ed in he
HFCS was 114,597.60 eu os in he hi d wa e.
Loca ion: Dummy a iable indica ing
whe he he household li es in a coun y o
Wes e n Eu ope = 1, o he wise = 0.
To ake in o accoun he di e ences o
indi idual coun ies om he mac oeconomic
poin o iew, he ollowing a iables ep esen ing
di e en implemen ed mac op uden ial policies
published by he Eu opean Commission (2019)
we e also included in he analysis:
Loan- o- alue a io: Va iable ep esen ing he
limi o he loan- o- alue a io o a gi en coun y.
LTV = 1, i household li es in a coun y whe e he
maximum LTV is in he ange 0.60–0.80; LTV = 2,
i he maximum LTV is in he ange 0.81–0.99,
and LTV = 3 i he maximum LTV is mo e han
0.99.
Mo gages in e es ax elie : Dummy
a iable ha deno es he exis ence o ax elie
on mo gage paymen s. The a iable equals
one i he household li es in a coun y whe e
such an exemp ion exis s, o he wise = 0.
Desc ip i e s a is ic o a iables is
summa ised in Tab. 1 and Tab. 2. All s a is ics
we e calcula ed using he HFCS da abase,
su ey weigh s, and i e impu ed da ase s.
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3. Me hodology
De e minan s o household inancial
ulne abili y we e es ima ed ollowing he
o dina y leas squa e (OLS) eg ession.
OLS eg ession allows de e mining he
ela i e in luence o one o mo e p edic o s
(explana o y) a iables o he c i e ion alue
(explained a iable) by es ima ing condi ional
mean unc ions. Addi ionally, es ima ed
coe icien s in he eg ession mean app oach
exp ess he a e age change in he explained
a iable associa ed wi h a one-uni change in
he ela ed explana o y a iable. The gene al
equa ion o he OLS mul iple eg ession model
has he ollowing o m:
Yi = β0 + β1xi,1 + β2xi,2 + … + εi (1)
Va iable Minimum Maximum Mean Median S d. de .
Vulne abili y
Fi s wa e 0.00 545.16 1.34 0.13 46.07
Seconds wa e 0.00 678.00 2.28 0.12 48.13
Thi d wa e 0.00 471.00 1.70 0.11 45.32
Weal h (EUR housand)
Fi s wa e −57,203.15 401,119.66 234.94 116.47 8.54
Seconds wa e −3,850.00 524,042.00 425.71 136.66 310.10
Thi d wa e −6,758.20 369,417.85 208.21 114.60 289.80
Real asse s (EUR housand)
Fi s wa e 0.00 391,419.30 467.54 198.56 2,630.06
Seconds wa e 0.00 468,442.00 355.60 150.50 2,346.41
Thi d wa e 0.00 345,312.43 337.85 141.42 1,913.96
Financial asse s (EUR housand)
Fi s wa e 0.00 101,139.66 119.54 13.30 956.84
Seconds wa e 0.00 295,488.21 108.29 9.92 137.82
Thi d wa e 0.00 192,392.51 99.00 9.79 1,148.05
Employmen
Fi s wa e 0.00 6.00 0.97 1.00 0.01
Seconds wa e 0.00 7.00 0.95 1.00 0.01
Thi d wa e 0.00 8.00 0.98 1.00 1.38
Child en
Fi s wa e 0.00 13.00 0.54 0.00 0.01
Seconds wa e 0.00 11.00 0.53 0.00 0.01
Thi d wa e 0.00 12.00 0.52 0.00 0.01
Elde ly
Fi s wa e 0.00 5.00 0.42 0.00 0.01
Seconds wa e 0.00 4.00 0.44 0.00 0.01
Thi d wa e 0.00 4.00 0.45 0.00 2.45
Sou ce: HFCS, own
Tab. 1: Desc ip i e s a is ic
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whe e:
Yi : explained a iable, in case o ou s udy i
was he inancial ulne abili y ep esen ed by
deb se ice- o-income a io;
x1 , x2 , ..., xi : explana o y a iables, ep esen
he household cha ac e is ics in an obse a ion i;
i: he numbe o obse a ions, i = 0, 1, 2, …, N;
ε: e o e m;
Va iable Fi s wa e Second wa e Thi d wa e
Gende
Men 68.76 62.39 61.65
Women 31.24 37.61 38.35
Educa ion
Null 1.60 0.78 0.14
ISCED 1 19.25 14.61 13.42
ISCED 2 16.23 15.20 12.75
ISCED 3 34.38 39.82 42.18
ISCED 4 3.64 2.87 3.57
ISCED 5 22.70 24.69 25.81
ISCED 6 2.20 2.03 2.13
Employmen
Null 36.71 38.19 36.94
One 33.46 32.80 33.33
Two 26.24 25.49 25.83
Th ee 2.97 2.95 3.04
Fou 0.57 0.56 0.73
Fi e and mo e 0.05 0.01 0.13
Elde ly
Null 65.99 67.49 66.51
One 20.40 21.66 22.01
Two 10.81 10.72 11.37
Th ee 1.02 0.12 0.10
Fou and mo e 1.78 0.01 0.01
Child en
Null 65.91 68.81 70.22
One 15.81 15.12 13.65
Two 12.68 12.50 11.75
Th ee 3.17 3.07 3.36
Fou 0.60 0.71 0.77
Fi e and mo e 1.83 0.25 0.25
Sou ce: HFCS, own
Tab. 2: Desc ip i e s a is ic (% sha e o household based on household
cha ac e is ics)
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β0: es ima ed Y-in e cep ;
βj: p oxy he alue o eg ession coe icien j o
j = 0, 1, 2, …, K.
The o dina y leas squa es es ima o is
ob ained by minimizing he sum o squa ed
esiduals:
(2)
OLS model was checked o compe ing
key assump ions: mul i a ia e no mali y, no
au oco ela ion, and homoscedas ici y, and no
co ela ion be ween explana o y a iables using
Ja que-Be a es , VIF ac o , Du bin-Wa son
es , B eusch-Pagan es , and Gold eld-Quand
es . Viola ion o some o hese assump ions
should lead o biased coe icien es ima ions.
He e oscedas ici y and au oco ela ion-
consis en (HAC) es ima o s o he a iance-
co a iance ma ix helped sol e his issue
(Zeileis e al., 2004).
While he leas -squa es eg ession analysis
does no gi e obus esul s in he p esence o
ou lie s and da a should ha e skewness and
ku osis ha ma ches a no mal dis ibu ion, as
an al e na i e, quan ile eg ession was used
(Noma ye & Phi i, 2017; Ri e o & San oman,
2018; Hua & E eyge s, 2019). The quan ile
eg ession app oach can be applied e en i he
assump ion o homoscedas ici y is iola ed. Fo
example, OLS eg ession conside s he e ec
o explana o y on explained a iables a he
mean, bu quan ile eg ession conside s his
ela ionship a di e en quan iles (deno ed by
q) o he dis ibu ion o an explained a iable
(Koenke & Basse , 1978).
Quan ile eg ession aims a es ima ing he
condi ional median (o o he quan iles) o he
esponse a iable employing symme ic weigh s
o he median (quan ile = 0.5) and asymme ic
weigh s o o he quan iles (e.g., 0.1, 0.2, ...,
0.9). Quan ile eg ession es ima es a e ob ained
by minimising an asymme ically weigh ed sum
o absolu e de ia ions (Waldmann, 2018).
Following Koenke and Basse (1978),
conside (yi , xi) i = 1, ..., N a andom sample
ob ained om a popula ion, whe e xi is a ec o o
explana o y a iables and yi ep esen s explained
a iable. Then he gene al equa ion o eg ession
o a ce ain quan ile 0 < θ <1 is de ined as he
solu ion o he minimiza ion p oblem:
(3)
Mone a y alues (weal h, income, asse s,
and deb ) used in he p esen ed s udy do no
mee he s a is ical assump ions o esea ch
mainly due o skewed dis ibu ions o en;
he e o e, he na u al log and ca ego ical
ans o ma ions a e used. Howe e , when
he na u al log is no he mos app op ia e
ans o ma ion, he e a e se e al cases, while i
should no be aken o ze o o nega i e alues.
The submi ed pape used in e se hype bolic
sine ans o ma ion ha can be exp essed as
(F iedline e al., 2014):
(4)
whe e: x is he a iable o in e es (weal h,
asse , deb ) and ihs(x) is he ans o med
e sion o his a iable.
The whole s a is ical compu ing analysis
was execu ed in he R so wa e en i onmen
(R Co e Team, 2018) and ook in o accoun he
weigh s and mul iple impu a ions o he HFCS
da abase.
4. Resea ch Resul s and Discussion
The e ec o household and household head
cha ac e is ics on he le el o household
inancial ulne abili y in he selec ed Eu opean
coun ies is epo ed in Tab. 3, Tab. 4, and
Tab. 5 ha display he esul s o OLS and
quan ile eg ession. The i s column con ains
he OLS es ima es, he second OLS es ima es
a e applica ion o he e oscedas ici y and
au oco ela ion consis en (HAC) co a iance
ma ix. The nex columns show he esul s
o quan ile eg ession acco ding o a ious
quan iles. G ey shaded ows display es ima es,
while whi e i alic ows a e p- alues (bold on
indica es s a is ical signi icance). Mo eo e ,
sca e plo isualisa ion was used and
p esen ed in Fig. 1, Fig. 2, and Fig. 3. The
x-axis displays he quan iles, while he y-axis
p esen s coe icien s. The s aigh do ed line
ep esen s OLS es ima es, and wo s aigh
dashed lines show OLS con idence in e als.
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Finance
o cope wi h exis ing inancial commi men s
(Eu opean Cen al Bank, 2013). House p ices
decline lowe ed he ne weal h o households
ela i e o hei deb . A he same ime, deb
paymen s swelled in eac ion o in la ion and
dep ecia ion.
As a consequence o he global inancial
c isis, many Eu opean households los inancial
s abili y and had o cope wi h ulne abili y
(Claessens e al., 2014). Thus, he economic
en i onmen and essen ial changes in he
alue o eal es a e and household ne weal h
signi ican ly a ec ed he ulne abili y o
households in he second wa e o he su ey.
Ou esul s indica e ha weal h, inancial, and
eal asse s a e s a is ically signi ican in each
decile o ulne abili y dis ibu ion compa ed o
he i s wa e. Ano he s a is ically signi ican
de e minan ac oss he whole dis ibu ion
o deb se ice- o-income a io is mo gage
in e es ax elie , he numbe o elde lies, and
employmen .
The las hi d wa e o he HFCS epo ed in
Tab. 5 and Fig. 3 did no signi ican ly di e om
he p e ious wo wa es.
In he pe iod be ween he yea o he second
(2014) and hi d (2017) su ey, he g adual
economic eco e y associa ed wi h he s eadily
declining unemploymen a e and lowe ing
cos s o household deb could be obse ed.
Conce ning his, he hi d wa e highligh ed he
he e ogeneous de elopmen s in o al liabili ies
and asse s o households. In his pe iod, he
mos indeb ed Eu opean households could
eel an easing o hei inancial p essu e mainly
due o income and asse p ices ising due o
economic eco e y (Eu opean Cen al Bank,
2020).
Fig. 3: Resul s o quan ile eg ession om he hi d wa e o he HFCS
Sou ce: FCS, own
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As i can be seen, he impac o household,
household-head cha ac e is ics, inancial,
and mac oeconomic de e minan s gene ally
emained unchanged in all h ee wa es excep
o mo gage in e es ax elie , LTV es ic ions,
and dummy a iables Loca ion and Gende .
A a iable ep esen ing he exis ence o
mo gage in e es ax elie showed he mos
conside able di e ence. While in he i s wo
wa es o he HFCS su ey we e households
om coun ies wi h mo gage in e es ax elie
less indeb ed, ax deduc ion was associa ed
wi h inc eased ulne abili y in he las wa e.
Al hough he lis o coun ies (Belgium, Es onia,
Finland, I aly, Luxembou g, he Ne he lands)
p o iding his ype o ax deduc ion did no
change be ween 2014 and 2017, household
demand o mo gages inc eased. Thus, while
mo gage in e es ax elie encou ages people
o buy la ge homes and commi o la ge
mo gages (Alpanda & Zabai y, 2017; G ube
e al., 2017), i h ea ens household inancial
s abili y.
The HFCS hi d wa e esul s also show ha
only male-headed households om he i s
decile o deb se ice- o-income dis ibu ion a e
mo e ulne able a e con olling all a iables.
Acco ding o he esul s o analysis applied
on he da a om he las wa e, households
om Wes e n Eu opean coun ies a e less
ulne able in he case o he uppe ou deciles.
The di e ence was eco ded in he
s a is ical signi icance o analysed a iables
as well. Compa ed o he p e ious wo wa es,
esul s con i m ha mo gage in e es ax elie ,
he numbe o elde lies, and he alue o eal
asse s a e s a is ically signi ican ac o s.
Mo eo e , he loan- o- alue a io and inancial
asse s a e also s a is ically signi ican in he
hi d wa e o HFCS.
Conclusions
In he cu en economic si ua ion, households
ha e a challenging ole while conside ing
hei expec a ions o li ing s anda ds and
inancial decisions. Household economic
beha iou , o e -indeb edness, and inancial
ulne abili y ha e an impac on he inancial
ma ke s and a e p ecu so s o c isis as well. I
esul ed in a g owing in e es in analysing he
inancial beha iou , isk p o ile, and s abili y o
households. New da a su eys such as HFCS
ha e opened a b oad ield o in es iga ing
household indeb edness and allows au ho i ies
o ake p i a e household cha ac e is ics in o
accoun .
The empi ical esea ch o his pape
ocused on he po en ial d i e s o household
inancial ulne abili y in eu o a ea households.
By using all h ee wa es o HFCS ob ained
om he Eu opean Cen al Bank, OLS and
quan ile eg ession es ima ion p ocedu es
we e conduc ed o conside he e ec o
household, household-head, and coun y-
speci ic cha ac e is ics on he le el o
household ulne abili y. To ake in o accoun
he skewness o mone a y alues, hype bolic
sine ans o ma ion was used.
In esponse o he esea ch ques ions,
i can be s a ed ha only he numbe o
household membe s aged 65 and mo e and
he le el o weal h we e s a is ically signi ican
socio-demog aphic ac o s ac oss he whole
ulne abili y dis ibu ion in all h ee wa es. Mo e
household membe s aged 65+ and g ea e
alue o household weal h we e associa ed
wi h he dec ease o household inancial
agili y indica o . A mo e signi ican di e ence
in esul s was obse ed in he case o a iables
ep esen ing implemen ed mac op uden ial
policies. In he i s wa e, he g ea e LTV has
associa ed wi h an inc ease in he deb se ice-
o-income a io. Households om coun ies wi h
he exis ence o mo gage in e es ax elie
epo ed lowe inancial ulne abili y. Resul s
om he hi d wa e showed ha g ea e LTV
leads o lowe ulne abili y, while ax deduc ion
expec s highe ulne abili y o households.
Wha exac ly explains he di e ence in he
esul s is an open ques ion ha dese es o be
explo ed u he .
O he explana o y a iables did no epo
s a is ical signi icance ac oss he whole
dis ibu ion o ulne abili y. Howe e , mos o
he explained a iables eco ded he same
e ec on household inancial ulne abili y
indica o s ac oss i s whole dis ibu ion in all
h ee wa es. Resul s indica ed ha he numbe
o child en and he alue o eal asse s we e
he only a iables ha posi i ely a ec ed he
ulne abili y in all Household Finance and
Consump ion Su ey obse a ions. On he
o he hand, he e ec o weal h, inancial asse s,
educa ion, and employmen was nega i e in all
obse a ions o all wa es.
Howe e , his s udy has some limi a ions.
Fo example, speci ic ea u es o he HFCS
da abase, such as new coun ies pa icipa ed
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in each wa e o di e ences in he me hodology,
could lead o biased esul s be ween indi idual
wa es, and i should be aken in o conside a ion.
The e o e, o u u e esea ch, we ecommend
ex ending he analysis o indi idual coun ies.
The submi ed s udy con ibu es o he
exis ing li e a u e in se e al ways. Fi s ly,
household-le el da a (HFCS) allowed de ailed
analysis o household inancial ulne abili y and
household and household-head cha ac e is ics.
Fu he mo e, he applica ion o coun y-speci ic
a iables enabled he conside a ion o he
di e en coun ies and hei implemen ed
policies ha could a ec he le el o ulne abili y.
Secondly, while mos o he s udies analysing
he de e minan s o inancial s abili y used da a
om one wa e o he HFCS su ey, i does
no allow o conside he di e en economic
si ua ion ha due o he global inancial c isis
occu ed be ween he i s and second wa e o
he HFCS su ey. Quan ile eg ession applied
indi idually o each wa e hus allows no only
o compa e he esul s and ill his gap, bu also
o con ibu e o he exis ing li e a u e. Mo eo e ,
using he quan ile eg ession app oach
conside ed ha ac o s in luencing he le el o
household ulne abili y could di e in indi idual
quan iles o household ulne abili y dis ibu ion.
Acknowledgemen s: This pape used he da a
om he Eu osys em Household Finance and
Consump ion Su ey. The Eu opean Cen al
Bank is no esponsible o he esul s in e p e ed
in his esea ch pape . The p esen ed pape is
a pa ially ou pu om he G an GAAA 5-5/2020
“Family business in egions”.
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Appendix
Fi s wa e (HFCS 2010) Second wa e (HFCS 2014) Thi d wa e (HFCS 2017)
Aus ia, Belgium, Cyp us,
Ge many, Spain, Finland,
F ance, G eece, I aly, Mal a,
Luxembou g, he Ne he lands,
Po ugal, Slo enia, Slo akia
Aus ia, Belgium, Cyp us,
Ge many, Spain, Finland,
F ance, G eece, I aly, Mal a,
Luxembou g, he Ne he lands,
Po ugal, Slo enia, Slo akia,
Poland, I eland, Hunga y,
Es onia, Li huania
Aus ia, Belgium, Cyp us,
Ge many, Spain, Finland,
F ance, G eece, I aly, Mal a,
Luxembou g, he Ne he lands,
Po ugal, Slo enia, Slo akia,
Poland, I eland, Hunga y,
Es onia, Li huania, C oa ia,
La ia
Sou ce: HFCS, own
No e: Coun ies w i en in bold pa icipa ed in he su ey o he i s ime.
Tab. A1: Coun ies pa icipa ed in he HFCS
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