5/2023 Eva Branten. Income expectations, risk attitudes and household borrowing decisions
Working Papers of Eesti Pank 5/2023
This paper studies whether positive expectations for real income and risk aversion can provide information beyond that given by the main economic and sociodemographic characteristics for predicting whether a household applied for a loan or increased its outstanding liabilities. Microdata from the Eurosystem Household Finance and Consumption Survey (HFCS) are employed in the study, which covers a subgroup of the countries conducting the survey that have a panel component. The main estimation method used is a set of panel data fixed effects models. The estimation results imply that positive expectations for real income matter for increases in mortgage loans, but not for non-mortgage loans. Risk aversion is negatively related with the probability of applying for a loan but has no significant effect on an increase in debt.
JEL Codes: G51, D14
DOI: 10.23656/25045520/052023/0204
Keywords: household borrowing, financial expectations, risk attitudes, Eurosystem Household Finance and Consumption Survey
This paper uses data from the Eurosystem Household Finance and Consumption Survey. The results published and the related observations and analysis may not correspond to the results or analysis of the data producers.
Email: [email protected]
The views expressed are those of the authors and do not necessarily represent the official views of Eesti Pank or the Eurosystem
