Italian household debt over the business cycle (1998-2004)

This paper aims to analyse the socio-economic characteristics of indebted Italian households and their changes in the recession period (2001-2004) with respect to that of expansion (1997 – 2000). The analysis of data from the Bank of Italy’s Survey of Household Income and Wealth (SHIW) for the years 1998, 2000, 2002 and 2004 and with reference to the two different phases of the business cycle, has helped to answer the aforesaid questions. More specifically, Multiple Correspondence Analysis applied to the Bank of Italy’s Survey data, has highlighted that, on the whole, the indebted household economic features have undergone, in the recession period with respect to that of expansion, noteworthy changes, partly due to the gradual transformation of instruments used in the payment of instalments on more favourable terms, and partly due to the high uncertainty with regard to the general economic perspectives which characterize the recession period. As a matter of fact, access to the credit market to purchase or to restructure buildings and to purchase real goods, proves to be easier even for poorer households, as long as the head is employed. This trend arises, in the recession period and as far as the purchase or restructuring of buildings is concerned, from a noteworthy reduction in the interest rates put on loans (especially for those characterized by a variable rate of interest) and from the opportunity offered by credit and financial institutions to raise a loan for higher amounts or percentage of the mortgaged estate value than in the past. As far as the purchase of real goods is concerned, the above mentioned trend arises, to a large extent, from the greater attention shown by households, during periods of high uncertainty with regard to general economic perspectives, towards safe investments. Moreover, the results show a significant relationship between household propensity to incur debt and the job status of the head, which strengthened during the recent recession period; as a matter of fact, the propensity to incur debt to purchase more expensive goods is higher with reference to households with an employed head, as they can easily guarantee an adequate income in order to meet loan obligations. On the other hand, the propensity of households with an unemployed head to incur debt to purchase non durable goods is, out of necessity, greater than for other household classes, and it has been made easier by the widening of the forms of payments offered by banks and financial institutions and desired by the same traders throughout the recession period in order to maintain business