The Italian Crisis and Producer Households Debt: a Source of Stability? A Reproducible Research

TL;DR

This study analyzes the debt stability of Italian producer households during the 2008 crisis, finding their debt was more stable than non-financial corporations and challenging the idea of rapid debt retrenchment.

Contribution

It introduces a reproducible analysis of producer household debt in Italy, highlighting their stability and potential role in macroeconomic resilience during crises.

Findings

Producer household debt was more stable than non-financial corporations.

No evidence of rapid debt increase or retrenchment during the 2008 crisis.

Debt ratios followed specific polynomial trends starting in 2008.

Abstract

The European Credit Research Institute Research Report 2013 identifies Households debt "rapid increase and abrupt retrenchment" among the causes of macroeconomic instability in the European Union after 2008. In our research: i) we accessed the Bank of Italy Online Statistical Database on Customers and Risk for Producer Households and Non-Financial Corporations with R Sweave open access statistical software, which makes our analysis freely reproducible by other researchers; ii) we subset the European System of Accounts sector Households into the Bank of Italy sub-sectors Households and Producer Households, which are market producing entities limited to informal partnerships, de facto companies and sole proprietorships with up to five employees and iii) we tested the hypothesis of "rapid increase and abrupt retrenchment" of debt for this subset in Italy for the period 1996-2013. We found that PH debt (bad debt) has been more stable with a lower Variation Coefficient of 10.3% (14.2%) versus 13.2% (20.1%) in NFC. We also found that the time series of the ratio of debt granted to NFC (numerator) versus PH (denominator) is best described (Multiple Squared 0.95) by the concavity of the 5th degree coefficient (slope -1.22; 95% CI -1.52 - -0.91) of a 5th order polynomial linear regression and by the convexity of the 2nd degree coefficient (slope 4.26; 95% CI 2.53 - 5.99) for bad debt (Multiple R Squared 0.47), with this concavity of debt and convexity of bad debt beginning with the Italian crisis in the second trimester of 2008. We reject the hypothesis (p < 0.01) of "rapid increase and abrupt retrenchment" of debt for the subset Producer Households during the Italian Crisis. We generate the hypothesis that this subset could represent a prospective source of stability relative to Non-Financial Corporation.