Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/200794 
Year of Publication: 
2016
Citation: 
[Journal:] KDI Journal of Economic Policy [ISSN:] 2586-4130 [Volume:] 38 [Issue:] 3 [Publisher:] Korea Development Institute (KDI) [Place:] Sejong [Year:] 2016 [Pages:] 53-77
Publisher: 
Korea Development Institute (KDI), Sejong
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 findings of this paper may contribute to assessing household debt vulnerability and to enhancing regulatory and supervisory practices for financial stability.
Subjects: 
Household debt
Overindebtedness
Credit Risk
Stress Test
Financial Stability
JEL: 
D12
D14
G21
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-sa Logo
Document Type: 
Article

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