Ernesto Villanueva (Bank of Spain) - The Distribution of Debt Across Euro Area Countries: The Role of Individual Characteristics, Institutions and Credit Conditions

The speaker with be Ernesto Villanueva from the Bank of Spain, with a presentation "The Distribution of Debt Across Euro Area Countries: The Role of Individual Characteristics, Institutions and Credit Conditions".

Please note the venue for this week is A31 Sir Clive Granger

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, to achieve these aims. We find that the patterns of secured debt outcomes vary markedly across countries. Among all the institutions considered, the length of asset repossession periods best accounts for the features of 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.