BdF paper looks at household vulnerability

High levels of household debt magnify negative shocks and weaken positive ones, researchers find


High levels of financial vulnerability among households amplify the effects of negative shocks and weaken positive ones, a working paper published by the Banque de France finds.

In How does Financial Vulnerability amplify Housing and Credit Shocks?, Cyril Couaillier and Valerio Scalone present an econometric model based on data from the US. The authors use households’ debt service ratios, or DSRs, as a measure of financial vulnerability.

They identify a wide range of possible shocks to the

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