Household debt and financial vulnerability: empirical evidence for Spain, 2002–2020

• Published in: Empirica Vol. 51; no. 3; pp. 703 - 730
• Main Authors: Martín-Legendre, Juan Ignacio, Sánchez-Santos, José Manuel
• Format: Journal Article
• Language: English
• Published: New York Springer US 01-08-2024; Springer Nature B.V
• Subjects: Borrowing; Business cycles; Debt; Debt restructuring; Econometrics; Economic conditions; Economics; Economics and Finance; Employment; European Integration; Eurozone; Great Recession; Households; Hypotheses; Industrial Organization; International Economics; Low income groups; Macroeconomics/Monetary Economics//Financial Economics; Original Paper; Public Finance; Sociodemographics; Vulnerability; Financial vulnerability; Financial instability hypothesis; G20; E21; D14; Household debt; Survey data; Inequality
• ISSN: 0340-8744; 1573-6911
• DOI: 10.1007/s10663-024-09617-z

The aim of this paper is to analyse the evolution of Spanish households’ indebtedness and financial vulnerability over the course of this century using micro-data from the Household Finance and Consumption Survey. Our results show a growing debt participation of Spanish households and an increase in the stock of outstanding debt of indebted households, a trend that reversed with the end of the Great Recession. Moreover, the percentage of financially vulnerable households according to three indicators grew dramatically until the end of the downward phase of the last economic cycle and showed considerable signs of improvement during the second half of 2010s. These results, nonetheless, call attention to the number of Spanish households being unable to service their debts in the face of an economic downturn.