The Impact of Expense Shocks on the Financial Distress of Korean Households
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The main objective of this study is to examine the major determinants of householdfinancial distress, particularly expense shocks that increase the probability of failure in loan repayment. Using the survey of household finances published by Statistics Korea, the study investigates expense shocks that result in a large proportion of household income beingallocated to debt repayment, thus limiting the funds available for consuming goods and/orsaving. I use a bootstrapped random effect probit model and two-stage least squares model. In addition, in finding a variable’s optimal spit value and goodness of fit, I use an earlywarning signal methodology. The test results present the following three categories ofexpense shocks are sensitive to financial vulnerability: i) secured loans for debt repayment,medical expenses, and daily expenses; ii) unsecured credits for debt repayment, medicalexpenses and rents; iii) credit card loans for debt repayment, and rents.
Abstract
The main objective of this study is to examine the major determinants of householdfinancial distress, particularly expense shocks that increase the probability of failure in loan repayment. Using the survey of household finances published by Statistics Korea, the study investigates expense shocks that result in a large proportion of household income beingallocated to debt repayment, thus limiting the funds available for consuming goods and/orsaving. I use a bootstrapped random effect probit model and two-stage least squares model. In addition, in finding a variable’s optimal spit value and goodness of fit, I use an earlywarning signal methodology. The test results present the following three categories ofexpense shocks are sensitive to financial vulnerability: i) secured loans for debt repayment,medical expenses, and daily expenses; ii) unsecured credits for debt repayment, medicalexpenses and rents; iii) credit card loans for debt repayment, and rents.
참고문헌 (27)
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