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Household over-indebtedness and financial vulnerability in Korea : Evidence from credit bureau data†

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Title Household over-indebtedness and financial vulnerability in Korea
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Sub Title

Evidence from credit bureau data†

Material Type Articles
Author(English)

Kim, Youngil; Kim, hyoungchan; Yoo, Joohee

Publisher

[Sejong, South Korea]:Korea Development Institute

Date 2016-08
Journal Title; Vol./Issue KDI Journal of Economic Policy:vol. 38(no. 3)
Pages 24
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Conditions
Social Development < Others
Holding Korea Development Institute

Abstract

Financial soundness in the household sector matters for financial stability and for the real economy. The level of household debt in Korea raises concern about the financial soundness of the household sector due to its size, growth rate and quality. Against this backdrop, we assess the financial vulnerability of borrowers based on an analysis of credit bureau (CB) data, in which the actual credit activities of most individuals are recorded at a high frequency in Korea. We construct over-indebtedness indicators from the CB data and then assess the predictability of forthcoming defaults. Based on the over-indebtedness indicators, we show how borrowers are distributed in terms of over-indebtedness and how the over-indebted differ from average borrowers in terms of their characteristics. Furthermore, we show how the aggregate credit risk in the household sector would change under macroeconomic distress by analyzing how each borrower’s credit quality would be affected by adverse shocks. (The rest omitted)