Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322045 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3034
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Large-scale debt forbearance is a key policy tool during crises, yet targeting is challenging due to information asymmetries. Using transaction-level data from a Portuguese bank during COVID-19, we find that financially fragile households are more likely to enter forbearance, irrespective of income shocks. Mortgage payment suspension increases consumption and savings, but effects differ across households. Low liquid wealth and income are associated with a higher marginal propensity to consume. Additionally, ineligible households accessing forbearance show a higher propensity to consume than eligible ones. Our results suggest that observable household characteristics can help in the design of effective debt relief policies.
Subjects: 
Debt forbearance
Mortgages
Consumption
Income
COVID-19 pandemic
JEL: 
E21
E62
G28
G50
H31
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7116-4
Document Type: 
Working Paper

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