A Generalized Framework for the Assessment of Household Financial Vulnerability
IMF Working Papers, November 7, 2017
Source details
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- A Generalized Framework for the Assessment of Household Financial Vulnerability
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Bibliographic details
- Authors: Mindaugas Leika, Daniela Marchettini
- Published: November 7, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484322352.001
Summary
- Household financial fragility received considerable attention following the global financial crisis.
- Substantial gaps remain in the analytical underpinnings of household financial vulnerability assessment and in data availability.
- The paper integrates contributions in the literature into a coherent framework.
- Analytical and estimation extensions are proposed to improve estimate quality and to allow assessment in the presence of data limitations.
- The resulting comprehensive framework has wide applicability to both advanced and developing economies.
- For illustrative purposes, the paper includes a detailed application to one developing country (Namibia).
Framework and Methodology
- Integrates literature on household financial vulnerability into a generalized, coherent framework.
- Proposes analytical extensions aimed at improving quality of estimates.
- Proposes estimation extensions allowing assessment when facing data limitations.
- Methods include non-parametric methods, sensitivity analysis, and stress test approaches (keywords reflect methodological focus).
Application and Scope
- Detailed application provided for Namibia as an illustrative developing-country case.
- Framework designed for applicability to both advanced and developing economies.
- Subjects covered include: Debt burden, Disposable income, External debt, Financial institutions, Financial sector policy and analysis, Financial sector risk, Mortgages, National accounts, Personal income.
Key Findings and Analytical Emphases
- Emphasizes assessment of household debt-related measures: debt burden, debt level, debt obligation, debt payment, debt repayment side, debt service.
- Focus on household-level indicators: gross income, household debt, household DTI ratio, interest rate, payments DPh.
- Highlights use of microdata where available and approaches to handle limited data.
- Addresses credit risk and composite index construction for vulnerability measurement.
Policy Implications and Use Cases
- Provides a comprehensive diagnostic tool for policymakers to assess household financial vulnerability.
- Useful for financial sector risk monitoring and stress-testing at the household level.
- Applicable to policymakers in both advanced and developing economies seeking to evaluate household-level exposures and resilience.
Content in this bundle
- wp17228 — Operationalizing the Concept of Household Financial Vulnerability