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Merike Kukkresearch

2/2014 Merike Kukk. Distinguishing the components of household financial wealth: The impact of liabilities on assets in euro area countries

Working Papers of Eesti Pank 2/2014

Article: How does household debt affect financial asset holdings? Evidence from euro area countries, 2017, Studies in Economics and Finance, Vol. 34, No. 2, pp. 194-212.

The paper investigates the interdependence of household financial liabilities and assets, with special focus on the impact of liabilities on households’ holdings of financial assets. The paper uses the new ECB Household Finance and Consumption Survey from 2009–2010 covering euro area countries. The paper estimates a system of equations for households’ financial liabilities and assets, taking account of endogeneity and selection bias. The results indicate that higher household liabilities are related to lower holdings of financial assets. The findings are consistent with the hypothesis that wider use of credit leads to lower savings. The paper highlights that the distinction between the components of households’ wealth provides additional insights into households’ financial behaviour.

JEL Codes: D14, E21, D12

Keywords: household debt, household wealth, financial assets, liabilities, financial vulnerability

Author's e-mail address: [email protected]


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The views expressed are those of the author and do not necessarily represent the official views of Eesti Pank.

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