Household Wealth and Resilience to Financial Shocks in Italy
IMF Working Papers, August 31, 2018
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- Household Wealth and Resilience to Financial Shocks in Italy
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Bibliographic details
- Authors: Daniel Garcia-Macia
- Published: August 31, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484374894.001
Overview
- Title: Household Wealth and Resilience to Financial Shocks in Italy
- Author: Daniel Garcia-Macia
- Date: August 31, 2018
- Type: IMF Working Paper (Working Paper No. 2018/196)
- Core objective: Document changes in the Italian household sector’s financial wealth over the past two decades by constructing the matrix of bilateral financial sectoral exposures; simulate different financial shocks to gauge the ability of the household sector to absorb losses.
Key findings on household wealth and sectoral exposures
- High household wealth is highlighted as a key strength of the Italian economy.
- In both absolute terms and relative to income, the Italian household sector is wealthier than most euro area peers.
- A sizable fraction of this wealth is held by the rich and upper middle classes.
- Over the past two decades, households became increasingly exposed to the financial sector.
- The financial sector was in turn exposed to the highly indebted real and government sectors.
- Subject tags from the paper include: Banking, Creditor bail-in, Economic sectors, Financial crises, Financial institutions, Financial sector, Income distribution, National accounts, Sovereign bonds, Stocks.
- Keywords include: bail-in, bail-in case, bailout, balance sheet analysis, bond, Creditor bail-in, equity impact, financial asset holding, financial linkages, Financial sector, flow of funds, flow-of-funds datum, Global, government bond, Income distribution, MFI assets, non-financial corporates, sectoral financial asset exposure, Sovereign bonds, Stocks, WP.
Simulated shocks and illustrative calculations
- The paper simulates different financial shocks to assess household loss-absorbing capacity.
- Simple illustrative calculations are presented for:
- A fall in the value of government bonds.
- Bank bail-ins versus bailouts.
- Methodological approach: construction of the matrix of bilateral financial sectoral exposures and flow-of-funds style balance sheet analysis.
Implications and policy-relevant considerations
- The increasing exposure of households to the financial sector implies indirect vulnerability through the financial sector’s exposure to highly indebted real and government sectors.
- Comparisons with euro area peers point to distributional concentration of wealth (rich and upper middle classes), which is relevant for evaluating aggregate resilience and distributional impacts of financial shocks.
- The bank bail-in versus bailout simulations are relevant for evaluating creditor-loss allocation and potential equity impacts on households.
Content in this bundle
- Household Wealth and Resilience to Financial Shocks in Italy, WP/18/196, August 2018