The impact of the cost-of-living crisis on European households

Cha wehé, Bo is; Ricci, Ma ia; S öhlke , Daniel
Wo king Pape
The impac o he cos -o -li ing c isis on Eu opean
households
JRC Wo king Pape s on Taxa ion and S uc u al Re o ms, No. 01/2024
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The Impac o he Cos -o -Li ing C isis
on Eu opean Households
JRC Wo king Pape s on
Taxa ion and S uc u al
Re o ms No 01/2024
Cha wehé, B.
Ricci, M.
S öhlke , D.
2024
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1
Abs ac
We s udy he impac o he ecen cos -o -li ing c isis on Eu opean households using da a on indi idual
consump ion, income, and weal h. We accoun o he a ious channels h ough which in la ion a ec s
indi idual households and o he mone a y and iscal policy esponses o he in la iona y shock. Ou esul s
indica e ha on a e age pension-age households los nea ly h ee imes as much as hei wo king-age
coun e pa , due o he de alua ion o hei nominal weal h. Along he income dis ibu ion, di e ences in
nominal asse holdings and in he e olu ion o nominal incomes imply ha he in la iona y shock was
eg essi e o wo king-age households and mos ly la o pension-age households. O e all, high-income
wo king-age households wi h mo gage deb gained he mos om he in la iona y su ge, while olde
indi iduals wi h la ge nominal asse posi ions we e hose o which he la ges losses we e eco ded. Fiscal
policy measu es we e able o pa ially o se he impac o he c isis on he mos ulne able households. The
in e es a e esponse o he c isis pa ially o se he losses eco ded by households wi h la ge nominal asse
posi ions.
2
Acknowledgemen s
We wish o hank Maximilian F eie om he Eu opean Cen al Bank o a ho ough e iew o his wo k. The
au ho s a e indeb ed o Sal ado Ba ios o his ad ice and guidance. Fu he mo e, he au ho s g a e ully
acknowledge help ul commen s om Gonzalo Paz-Pa do, Ma eo Sal o, Bo omeus Wanengki yo, and semina
pa icipan s a he Fiscal Policy Modelling Wo kshop in Se ille. All e o s a e ou own.
Au ho s
Bo is Cha wehé
Ma ia Ricci
Daniel S öhlke

3
Execu i e Summa y
Policy con ex
The pape discusses he impac o he ecen in la ion su ge on Eu ozone households, a phenomenon d i en
by he COVID-19 s supply dis up ions and he Russian in asion o Uk aine. The inc eased cos o
li ing, pa icula ly due o spikes in ene gy p ices, has caused one o he mos se e e inancial s ain on
households in he de eloped wo ld in decades, wi h a ying e ec s on indi iduals depending on he
composi ion o hei consump ion baske s, income, and weal h. Go e nmen s in he Eu ozone ha e esponded
o he c isis wi h iscal measu es es ima ed o cos a ound 2% o GDP. Some o hese measu es we e
pa icula ly designed o shield ulne able g oups om he impac o in la ion. Meanwhile, he Eu opean
Cen al Bank has aised in e es a es o his o ical highs, a ec ing bo h bo owe s and lende s. Those policy
esponses cons i u ed an in eg al pa o he cos -o -li ing c isis pe iod, as hey explici ly ackled he
in la iona y shock and we e key de e mina weal h.
Main analysis
In his pape , we s udy he impac o he cos -o -li ing c isis on Eu ozone households, conside ing bo h he
e ec s o he in la iona y shock and hose o he iscal and mone a y policy esponses. In la iona y shocks
ha e an immedia e e ec on households h ough h ee main channels: he Fishe channel (in luencing ne
c edi o s and deb o s di e en ly due o nominal con ac s), he ela i e consump ion channel (due o
he e ogeneous consump ion pa e ns a ec ing indi idual exposu es o in la ion), and he nominal income
channel (due o he de alua ion o s icky nominal incomes). By u ilizing a ious da a sou ces, including he
Household Finance and Consump ion Su ey (HFCS) and he EUROMOD mic osimula ion model, he pape
quan i ies hese e ec s ac oss he income dis ibu ion, he demog aphic s a us and o he popula ion g oups.
Ou analysis c ucially inco po a es he e ec s o mone a y and iscal policy esponses. The mone a y policy
Unhedged In e es Ra e Exposu e (URE), which measu es inancial gains o
losses ollowing in e es a e changes depending ne inancing needs, which a e in luenced by
hei po olio composi ions. Fiscal policy e ec s a e assessed using mic osimula ion echniques o es ima e
he cushioning e ec s o go e nmen measu es, including bo h p ice and income-side in e en ions.
The pape posi ions i sel wi hin he li e a u e ha examines he he e ogeneous e ec s o he ecen cos -o -
li ing c isis on Eu opean households. While ela ed s udies ha e explo ed a ious aspec s in isola ion, his
pape p o ides a comp ehensi e assessmen by conside ing he di ec e ec s o in la ion oge he wi h
e ec s a ising om iscal and mone a y policy esponses. I ex ends p e ious esea ch by p o iding a
comp ehensi e c oss-coun y analysis, inco po a ing he he impac o in e es a e inc eases on
weal h, and by highligh ing he impo ance o cha ac e is ics like home owne ship in d i ing he
he e ogeneous e ec s o he c isis on Eu opean households.
Key conclusions
We ind ha pension-age households los nea ly h ee imes as much as hei wo king-age coun e pa due o
he de alua ion o he nominal weal h hey accumula ed du ing hei li e cycle. Di e ences in nominal
balances and in he e olu ion o nominal incomes om di e en sou ces u he imply ha he in la iona y
shock was eg essi e among wo king-age households bu mos ly la among he pension-age. In mos cases,
he impac o in la ion h ough he Fishe and nominal income channels was an o de o magni ude la ge
han he ela i e consump ion channel, which has been he ocus o much o he ela ed li e a u e.
Looking a he impac o he iscal and mone a y esponse, in e es a e inc eases pa ially o se he losses
made by households wi h la ge nominal asse posi ions, mos ly pension-age households. In con as , he
ex ao dina y iscal measu es adop ed in esponse o he c isis we e able o pa ly o se he nega i e impac
o in la ion on he lowes -income households. None heless, in se e al coun ies, la ge losses emain among
he poo es households and hose o pension-age.
Finally, we ex end ou esul s o conside he ole o weal h composi ion in shaping he impac o he cos -o -
li ing c isis on popula ion sub-g oups. We ind ha households wi h ixed- a e mo gages and weal hy hand-
o-mou h households a e he bigges winne s o he cos -o -li ing c isis, whe eas pension-age households a e
he main lose s.
The Impac o he Cos -o -Li ing C isis
on Eu opean Households*
Bo is Cha weh´
e†Ma ia Ricci‡Daniel S ¨
ohlke §
May 15, 2024
Abs ac
We s udy he impac o he ecen cos -o -li ing c isis on Eu opean households using da a
on indi idual consump ion, income, and weal h. We accoun o he a ious channels
h ough which in la ion a ec s indi idual households and o he mone a y and iscal pol-
icy esponses o he in la iona y shock. Ou esul s indica e ha on a e age pension-age
households los nea ly h ee imes as much as hei wo king-age coun e pa , due o he
de alua ion o hei nominal weal h. Along he income dis ibu ion, di e ences in nom-
inal asse holdings and in he e olu ion o nominal incomes imply ha he in la iona y
shock was eg essi e o wo king-age households and mos ly la o pension-age house-
holds. O e all, high-income wo king-age households wi h mo gage deb gained he mos
om he in la iona y su ge, while olde indi iduals wi h la ge nominal asse posi ions we e
hose o which he la ges losses we e eco ded. Fiscal policy measu es we e able o pa -
ially o se he impac o he c isis on he mos ulne able households. The in e es a e
esponse o he c isis pa ially o se he losses eco ded by households wi h la ge nominal
asse posi ions.
Keywo ds: In la ion He e ogenei y, Mone a y and Fiscal Policy, Eu o A ea.
JEL classi ica ion: G51, D31, E31.
*The iews exp essed in his pape a e hose o he au ho s and should no be a ibu ed o he Eu opean
Commission, he Bank o England o i s commi ees. The au ho s g a e ully acknowledge help ul commen s om
Sal ado Ba ios, Maximilian F eie , Gonzalo Paz-Pa do, Ma eo Sal o, Bo omeus Wanengki yo, and semina
pa icipan s a he Fiscal Policy Modelling Wo kshop in Se ille.
†Bank o England. E-mail: [email p o ec ed].
‡Eu opean Commission (JRC Se ille). E-mail: [email p o ec ed]opa.eu.
§Eu opean Commission (JRC Se ille). E-mail: [email p o ec ed]opa.eu.
4
1 In oduc ion
The ecen su ge in in la ion – he esul o pos -pandemic supply dis up ions and he Russian
in asion o Uk aine – has had a p o ound impac on household inances ac oss many egions
o he globe. Households in he Eu ozone we e pa icula ly a ec ed by he shocks o ene gy
supplies and he ensuing p ice inc eases. In la ion has e oded he eal alue o nominal in-
comes and weal h, which has challenged he abili y o households o pay o consump ion,
he eby gene a ing one o he mos se e e cos -o -li ing c isis since decades. C ucially, he c i-
sis has a ec ed households in a he e ogeneous way. In pa icula , di e ences in consump ion
pa e ns, sou ces o income, and he le el and composi ion o weal h b ough abou subs an ial
di e ences in he way indi idual households we e impac ed by in la ion.
The in la iona y shock igge ed a bold policy esponse. Go e nmen s ac oss he Eu ozone
adop ed measu es o p o ec households agains he e ec s o in la ion, especially he mos
ulne able popula ion g oups. These iscal measu es a e es ima ed o ha e cos some 2% o
GDP in yea s 2022 and 2023 (Ba´
nkowski e al.,2023). On he mone a y policy side, he Eu o-
pean Cen al Bank aised in e es a es o unp eceden ed le els, inc easing he inancing cos
o loans and mo gages bu also he a e o e u ns o households e-in es ing hei sa ings.
Those policy esponses cons i u ed an in eg al pa o he cos -o -li ing c isis pe iod, as hey ex-
plici ly ackled he in la iona y shock and we e key de e minan s o i s impac on households’
weal h. Accoun ing o hem should he e o e be pa o any assessmen o his c isis.
In his pape , we s udy he impac o he cos -o -li ing c isis on Eu ozone households, con-
side ing bo h he e ec s o he in la iona y shock and hose o he iscal and mone a y policy
esponses. As discussed in Ca doso e al. (2022), in la iona y shocks ha e an immedia e e ec
on households h ough h ee main channels: (i) he Fishe channel, due o he ac ha some
households a e ne c edi o s and o he s a e ne deb o s in con ac s denomina ed in nominal
e ms; (ii) he ela i e consump ion channel due o di e ences in consump ion pa e ns ac oss
households, which gi es ise o di e ences in e ec i e indi idual in la ion a es; and (iii) he
nominal income channel, ha accoun s o he de alua ion o nominal incomes in he p esence
o nominal igidi ies. We quan i y he e ec s o hose channels on households in he Eu o-
zone ac oss he income dis ibu ion, using da a om he Household Finance and Consump-
ion Su ey (HFCS), combined wi h he Household Budge Su ey (HBS), EUROMOD ( he
mic o-simula ion model o he Eu opean Union) and i s unde lying EU-SILC da a.
5
We conside in addi ion he impac de i ing om he mone a y and iscal policy esponses
o he shock. On he mone a y policy side, we know om Aucle (2019) ha in e es a e
inc eases impac households’ balance shee s h ough he so-called ‘Unhedged In e es Ra e Ex-
posu e’ (URE). The URE p o ides a measu e o he inancial gain/loss ha households su e
ollowing an inc ease in he in e es a e, depending on hei ne inancing needs. These losses
depend on he composi ion o households’ po olios, and in pa icula he ma u i y o hei
asse s and liabili ies. We cons uc he URE a he household le el using HFCS da a o quan-
i y he impac o he in e es a e esponse on households ac oss popula ion subg oups. On
he iscal policy side, we d aw om he ecen wo k o Amo es e al. (2023a) o quan i y he
cushioning e ec s o iscal measu es on he “income-side”. To quan i y measu es on he “p ice-
side”, ins ead, we exploi di e ences be ween s anda d in la ion igu es and hose calcula ed
a cons an axes.1
We ind ha pension-age households los nea ly h ee imes as much as hei wo king-age
coun e pa due o he de alua ion o he nominal weal h hey accumula ed du ing hei li e
cycle. Di e ences in nominal balances and in he e olu ion o nominal incomes om di e en
sou ces u he imply ha he in la iona y shock was eg essi e among wo king-age house-
holds (a ec ing low-income households he mos ) bu mos ly la among he pension-age. In
mos cases, he impac o in la ion h ough he Fishe and nominal income channels was an
o de o magni ude la ge han he ela i e consump ion channel, which has been he ocus
o much o he ela ed li e a u e ci ed below. Looking a he impac o he iscal and mone-
a y esponse, in e es a e inc eases pa ially o se he losses made by households wi h la ge
nominal asse posi ions, mos ly pension-age households. By con as , he ex ao dina y is-
cal measu es adop ed in esponse o he c isis we e able o pa ly o se he nega i e impac
o in la ion on he poo es households. None heless, in se e al coun ies, la ge losses emain
among he poo es households and hose o pension age.
Finally, we ex end ou esul s o conside he ole o weal h composi ion in shaping he im-
pac o he cos -o -li ing c isis on popula ion sub-g oups. In pa icula , we look a he home-
owne ship, mo gage and hand- o-mou h s a us o households. We ind ha accoun ing o
he home-owne ship and mo gage s a us helps explain mos o he di e ences in he e ec s o
in la ion on household weal h ac oss age g oups. We show ha he e is subs an ial he e ogene-
1Th oughou he pape , we ollow he e minology used by Amo es e al. (2023a) and dis inguish be ween iscal
policy in e en ions aimed a di ec ly mi iga ing he e ec i e p ices paid by households - he p ice-side measu es-
and in e en ions aimed a suppo ing household incomes, he income-side measu es.
6
axes and iscal ans e s. Fo mally, we show in he Appendix ha he iscal impac can be
exp essed as:
da(τ)
j, =d˜
Tj,
|{z}
Income-side measu es
−"cj, dτc
j
dτc−1!+NNPj, + (1−λj, )y( )
j, −1#dτc
| {z }
P ice-side measu es: spending & weal h/income e ec s
(8)
The i s elemen , d˜
Tj, , cap u es income-side measu es adop ed by go e nmen s o suppo
household income di ec ly. The exac design o hose measu es and hei size a ied ac oss
coun ies, bu in mos cases hey we e a ge ed owa ds low-income households.
The second e m o Equ. (8) ela es o he e ec s o p ice-side measu es, wi h which go e n-
men s ied o dampen p ice p essu es h ough changes in indi ec axes, subsidies, discoun s,
e c. In ou amewo k, hose measu es – modeled h ough a change in consump ion ax a es
dτc– ha e a di ec e ec on consump ion p ices. The e o e, hey a ec he e ec i e in la ion
a es aced by households, mi iga ing he impac o in la ion h ough he ela i e consump ion,
Fishe and nominal income channels desc ibed abo e.
2.5 The Mone a y Policy Impac
In e es a e luc ua ions ha e a di ec e ec on he in e es income lows ecei ed o paid by
households. Ou analysis ocuses exclusi ely on such di ec ( i s -o de ) in e es a e e ec s
and dis ega ds he e ec ha mone a y policy has on economic ac i i y and in la ion.
As desc ibed in Aucle (2019), he impac o in e es a e changes on households’ balance
shee s can be summa ised h ough he so-called ‘Unhedged In e es Ra e Exposu e’ (URE).
The URE is de ined as he di e ence be ween ma u ing asse s and liabili ies a a gi en poin in
ime. Ma u ing asse s include households’ ne income, and ma u ing liabili ies include house-
holds’ cu en consump ion. In ne e ms, i is he esou ce low a ailable o households o
be sa ed o he amoun equi ed o be bo owed by households, o e an in e al o ime, ha
is exposed o cu en changes in in e es a es. Ob iously, i is impo an in his con ex o
conside each asse ’s and liabili y’s ma u i y, since longe ma u i ies pa ially p o ec house-
holds agains ansi o y in e es a e changes, as in he case o mo gage con ac s wi h ixed
in e es paymen s. Such asse s and liabili ies a e conside ed o be ‘hedged’ agains a change in
he in e es a e, as compa ed o ‘unhedged’ ones wi h sho ma u i ies. Assuming a comple e
pass- h ough o he policy a e in o e ail a es o deposi s and loans and bond p ices, he in-
13

di idual in e es a e exposu e ansla es one- o-one in o a (di ec ) e ec on indi idual weal h,
ollowing a change in he policy a e. Mo e o mally, we show in Appendix (A) ha he impac
o changing in e es a es can be summa ised as ollows:
da(R)
j, =UREj, dR (9)
whe e UREj, =B( )
−1
P +b( )
−1+yj, −Tj, −∑k
Pk,
P cj,k, is he di e ence be ween he ma u ing
asse s and ma u ing liabili ies o he household. Households wi h a posi i e URE, e.g. hose
who hold la ge amoun s o sigh accoun deposi s o o he sho - e m ins umen s, bene i om
a ise in in e es a es. By con as , households wi h a nega i e URE, e.g. hose holding la ge
amoun s o adjus able- a e mo gages, lose om an inc ease in in e es a es h ough highe
in e es paymen s on hei ma u ing deb posi ion.
3 Empi ical S a egy
We analyse he impac o he cos -o -li ing c isis on households in six Eu ozone coun ies:
Ge many, F ance, I aly, Spain, Po ugal, and G eece.7Fo his pu pose, we combine da a om
di e en sou ces o quan i y he e ec s o in la ion, iscal policy and mone a y policy de i ed in
he p e ious sec ion. Da a on household (g oss) income and consump ion, weal h and i s com-
posi ion a e ob ained om he hi d wa e o he Household Finance and Consump ion Su ey
(HFCS), con aining da a o he yea 2017.8In o ma ion on he composi ion o households’
consump ion baske a e ob ained om he 2015 Household Budge Su ey (HBS). Finally, he
EUROMOD mic o-simula ion model, oge he wi h i s Indi ec Tax Tool (ITT) ex ension,9a e
used o: (i) ansla e g oss incomes om he HFCS in o disposable incomes, (ii) cons uc a
measu e o nominal income g ow h du ing ou pe iod o analysis, and (iii) simula e he e ec s
o he iscal measu es.
7These coun ies oge he ep esen some 85% o he Eu ozone GDP; we hen use hem as a p oxy o he
Eu ozone as a whole.
8We delibe a ely e ain om using da a om he mos ecen ou h wa e o he HFCS su ey, which was
conduc ed be ween he i s hal o 2020 and he i s hal o 2022. Gi en he dis up i e na u e o he COVID-19
pandemic and i s impac on household balance shee s (e.g. h ough income losses and (in) olun a y sa ings), we
did no conside his da a o be he mos eliable o he exe cise we conduc in his pape .
9EUROMOD and ITT, in u n, make use o he EU-SILC and HBS as unde lying da a sou ces.
14
Table (1) p o ides a summa y o he a ious da a sou ces we use o compu e he e ec s o
he cos -o -li ing c isis ac oss popula ion g oups. In wha ollows, we desc ibe ou empi ical
s a egy in mo e de ail.
The in la iona y shock We conside he pe iod 2021M6-2023M12 as he main pe iod o anal-
ysis (i.e. pe iod in he language o he amewo k p esen ed abo e), as Eu ozone in la ion
s a ed o su ge in he second hal o 2021, and – while no ye ully back o he 2% a ge –
had al eady gone down signi ican ly by he end o 2023. To cons uc he ‘su p ise in la ion‘
measu e, we make use o he 2021Q3 wa e o he Su ey o P o essional Fo ecas e s (which
e lec s in la ion expec a ions o he inancial sec o as o mid-2021) o sub ac he expec ed
cumula i e in la ion om he ealised in la ion in ou pe iod o analysis.10
To compu e he di ec e ec s o in la ion, we u he use he HICP a cons an ax a es (HICP-
CT), which is a a ian o he HICP ha excludes he impac o changes in consump ion axes,
such as alue-added ax (VAT) and excise du ies, on consume p ices. We use his measu e o
sepa a e he di ec e ec s o in la ion om hose a ising om he iscal esponse appea ing in
Equ. (8), which a e epo ed sepa a ely.11
Popula ion g oups Ou main esul s (p esen ed below in Sec ion (4)) a e p o ided o popu-
la ion subg oups ha a y along he income and age dimensions. Fi s , we g oup households
in o deciles o g oss income, sepa a ely o each coun y. To ob ain a measu e o household
disposable income om he HFCS da a (which only con ains in o ma ion on ma ke incomes),
we make use o EUROMOD o calcula e he a io be ween g oss and disposable income by
decile o ma ke income (EUROMOD,2023).
Once households ha e been assigned o an income decile g oup, we assign hem o an age
g oup based on he epo ed age o he household head. We conside wo main age g oups:
wo king-age households, wi h age below 65, and e i emen -age households, wi h age abo e
65. We hen end up wi h 20 g oups in o al o each coun y. In Table (2), we epo he join
dis ibu ion o households in o hose wen y g oups in ow (A), pooling all coun ies oge he .
10The implied cumula i e in la ion o ecas o ou pe iod o analysis was o 2.494% in he 2021Q3 SPF. In
Appendix (D.1) we p o ide a igu e compa ing he in la ion pa h implied by his o ecas o ealised in la ion.
The gap be ween he wo is equal o 12.7 pe cen age poin s.
11One limi a ion o using he cons an - ax in la ion measu e is ha i does no include p ice-side measu es
which a e no ax- ela ed, such as p ice-caps and eimbu semen o highe ene gy p ices. This means ha he
iscal e ec s ha we epo in he pape a e e ec i ely a lowe bound on he ac ual e ec s o he iscal esponse
o in la ion. Headline and cons an - ax cumula i e in la ion a es du ing ou pe iod o in e es a e summa ised in
Table (1).
15
We obse e om he able ha , on a e age, he e is a highe sha e o households wi h young
indi iduals in high-income g oups, e lec ing he ac ha wo king-age indi iduals, who ob-
ain a la ge ac ion o hei income as labou income, ea n mo e han e i ees. The equi alen
igu es o indi idual coun ies a e a ailable in he Appendix C.1 o his pape .
In Sec ion (5), we ex end ou esul s by s udying he e ec s o he c isis on a ious popula-
ion subg oups acco ding o he composi ion and he le el o hei weal h. Rows (B) o (E) o
Table (2) show he ac ion o households acco ding o weal h cha ac e is ics such as he home-
owne ship and mo gage s a us, by income and age g oup. We obse e ha households wi h
young indi iduals a e on a e age less likely o be home-owne s (especially a he lowe end o
he income dis ibu ion), mo e likely o ha e a mo gage, and mo e likely o be conside ed as
‘hand- o-mou h’ (i.e. ha ing insu icien holdings o liquid asse s o smoo h ou consump ion
in he e en o a e se income shocks).12
Consump ion baske composi ion To compu e he e ec s o in la ion a ising om he el-
a i e consump ion channel, we need o accoun o he e ogenei y in consump ion baske s o
compu e e ec i e in la ion a es o ou age/income g oups o in e es . To do so, we use he
Household Budge Su ey (HBS), which p o ides in o ma ion on indi idual consump ion ex-
pendi u es by COICOP consump ion good ca ego y.13 HBS da a on ne incomes a e used o
g oup households in o income deciles. The HBS also con ains da a on age, so we a e able o
compu e age and decile-speci ic in la ion a es by coun y, ha we can hen plug in o Equ. (7)
when assessing he e ec s o in la ion.
Nominal income g ow h To ob ain he e ec s o in la ion h ough he nominal income chan-
nel, we need o compu e he alue o λj o each o ou g oups o in e es . As e lec ed in
Equ. (2), λjdeno es he ac ion o household income ha g ows wi h in la ion. To compu e
i om he da a, we assume ha all he g ow h in nominal ma ke incomes du ing ou pe-
iod o in e es was due o in la ion. We hen compu e g ow h in disposable incomes om
EUROMOD, using he ollowing s a egy. We i s use EUROMOD ‘up a ing ac o s’ o adjus
nominal incomes in he la es EU-SILC da a (da ing o 2021) o app oxima e hei alues in 2022
and in 2023.14 Then, o ob ain disposable income g ow h abs ac ing om he policy changes
12The Appendix p o ides mo e de ails on how indi iduals a e assigned o he a ious subg oups we conside .
13Da a on in la ion a es a he coun y le el and he COICOP 4-le el a cons an ax a es a e ob ained om he
ECB’s Ha monised Index o Consume P ices (HICP).
14EUROMOD ‘up a ing ac o s’ a e mos ly based on Eu os a da a on nominal income g ow h by sec-
o o ac i i y and income sou ce. The ull lis o up a ing ac o s used o each coun y and he unde -
16
du ing ou pe iod o analysis, we compu e i as:
1+∆Y=EM2023(y2023)
EM2023(y2022)×EM2022(y2022)
EM2022(y2021m6)(10)
whe e EM (·)summa ises he EUROMOD ax-bene i calcula o using policy ules o yea
o ansla e ma ke incomes yin o disposable incomes.15 Fo each yea , ma ke incomes
ya e upda ed, using up a ing ac o s be ween 2021M6 and yea . The ob ained alues o
up a ed incomes a e deno ed y in he abo e o mula. No e ha , by calcula ing in each yea
he a io be ween disposable incomes om up a ed and no up a ed ma ke incomes, we a e
e ec i ely elimina ing he e ec o policy changes. Finally, we compu e he alue o λ o each
coun y/popula ion g oup as λj=∆Yj
π, using ∆Yjcompu ed om (10), and whe e πis he
coun y’s agg ega e cumula i e in la ion a e a cons an ax a es o he pe iod 2021M6 o
2023M12.
Ne nominal asse posi ions and In e es a e exposu es The ne nominal asse posi ions
(NNP) and he ‘Unhedged In e es Ra e Exposu e’ (URE) o indi iduals, which a e necessa y
o es ima e he e ec s o in la ion and mone a y policy h ough he Fishe and in e es a e
channels (see Equ. (7) and (9)), a e compu ed a he household le el om he HFCS da a, be o e
agg ega ing hem by popula ion subg oups. De ails on how hose a iables a e compu ed a e
p o ided in Appendix (B.1) and (B.2).
Fiscal suppo As men ioned in Sec ion (2), o assess he e ec s o he iscal esponse o he
c isis, we dis inguish be ween he ‘p ice-side’ (in e en ions aiming a educing he p ices paid
by consume s), and ‘income-side’ ( iscal ans e s aiming a suppo ing household incomes).
To compu e he e ec s o p ice-side measu es, we make use o he egula HICP in la ion se ies
oge he wi h he HICP-CT measu e (which emo es he e ec o indi ec ax changes, and
which we use o compu e he di ec e ec s o in la ion, as desc ibed abo e) o ob ain an implici
measu e o he e ec o ax changes on in la ion, om Equ. (6). We hen use he alues o
τc(using agg ega e in la ion) and τc
j(using g oup-speci ic in la ion a es) ob ained om his
p ocedu e o compu e he iscal e ec s ou lined in Equ. (8).
lying da a sou ces a e documen ed in EUROMOD coun y epo s, a ailable online a : h ps://eu omod-
web.j c.ec.eu opa.eu/ esou ces/coun y- epo s.
15No e ha he policy ules used o upda e nominal incomes do no include he e ec s o he policy esponse o
he cos -o -li ing c isis, which a e epo ed in he iscal policy e ec s d˜
T.
17
To assess he e ec s o income-side iscal measu es, i.e. he a ious social bene i s and income
suppo measu es aken by go e nmen s o help households cope wi h ising li ing cos s – de-
no ed as d˜
Tj, in Equ. (8) – we d aw om he ecen wo k o Amo es e al. (2023a), who use mi-
c osimula ion echniques o es ima e he cushioning e ec o hose measu es by income decile
o he same subse o coun ies as he one we conside in his pape . As hose alues a e no
a ailable o di e en age g oups, we assign he same e ec s o wo king-age and e i emen -
age indi iduals ha a e pa o he same income decile. Mo eo e , gi en ha Amo es e al.
(2023a) p o ided hese calcula ions only o 2022, we p ojec hem o 2023 based on hei el-
a i e budge a y cos a he mac o le el.16 unde he assump ion ha he deg ee o a ge ing
(w 2022 measu es) did no change.
16The budge a y impac o iscal measu es adop ed by go e nmen s in 2022 and in 2023 in suppo o house-
holds a e d awn om he Eu opean Commission’s calcula ions, summa ised in Be huyne e al. (2022).
18

TABLE 1: Main Da a Sou ces and In la ion Numbe s
Va iable Sou ce/Value
Indi idual exposu es
Ne nominal posi ion (NNP) HFCS
G oss Income (Y) HFCS
Consump ion le el (C) HBS & HFCS
G oss o disposable income EUROMOD
In e es a e exposu e (URE) HFCS
In la ion e ec
Nominal income indexa ion (λj) EUROMOD
Agg ega e in la ion (π) ECB (HICP)
Expec ed in la ion (E −1π ) SPF (2.50%)
E ec i e in la ion a e (πj) HBS & COICOP4 π(ECB).
Policy esponse
Fiscal esponse (d˜
Ty) EUROMOD & Amo es e al. (2023a).
In e es a e esponse (R) ECB
Coun y HICP in la ion HICP-CT in la ion
F ance 12.94% 13.48%
Ge many 16.04% 16.29%
G eece 14.49% 14.55%
I aly 15.68% 16.19%
Po ugal 13.01 14.20%
Spain 12.66% 14.21%
Eu o A ea 15.18% 15.59%
No es: HFCS: Household Finance and Consump ion Su ey, 2017 (Wa e 3). SPF: Su ey o P o essional
Fo ecas e s, conduc ed by he ECB (2021Q3). HBS: Household Budge Su ey, 2015 wa e. EUROMOD is
he mic o-simula ion model o ax-bene i sys em o he EU27, which uses he EU S a is ics on Income
and Li ing Condi ions (EU-SILC) as i s main da a inpu sou ce. The EUROMOD ITT (Indi ec Tax Tool)
ex ension makes use o he Household Budge Su ey (HBS) as addi ional da a sou ce.
19
TABLE 2: Popula ion Dis ibu ion Ac oss Income Deciles
Decile 1 2 3 4 5 6 7 8 9 10
A All WA 7.16% 4.90% 5.77% 6.26% 6.65% 6.79% 7.41% 7.84% 8.10% 8.23%
RA 2.86% 5.11% 4.27% 3.74% 3.36% 3.17% 2.59% 2.19% 1.87% 1.76%
B Home-owne WA 1.96% 1.50% 2.41% 2.84% 3.47% 4.04% 5.03% 6.02% 6.73% 7.40%
RA 1.50% 2.77% 2.74% 2.75% 2.52% 2.61% 2.23% 2.00% 1.69% 1.66%
Non owne WA 5.19% 3.39% 3.36% 3.42 % 3.18% 2.76% 2.39% 1.83% 1.37% 0.84%
RA 1.34% 2.33% 1.53% 0.99% 0.83% 0.56% 0.36% 0.20% 0.18% 0.09%
C Mo gage WA 0.47% 0.41% 0.89% 1.04% 1.53% 1.89% 2.55% 3.05% 3.81% 4.18%
RA 0.06% 0.10% 0.12% 0.17% 0.18% 0.17% 0.17% 0.21% 0.26% 0.29%
No mo gage WA 1.49% 1.09% 1.51% 1.80% 1.94% 2.15% 2.48% 2.97% 2.92% 3.22%
RA 1.44% 2.68% 2.62% 2.58% 2.35% 2.44% 2.06% 1.79% 1.43% 1.37%
Non owne WA 5.19% 3.39% 3.36% 3.42 % 3.18% 2.76% 2.39% 1.83% 1.37% 0.84%
RA 1.34% 2.33% 1.53% 0.99% 0.83% 0.56% 0.36% 0.20% 0.18% 0.09%
D AR mo gage WA 0.22% 0.18% 0.43% 0.44% 0.64% 0.70% 0.78% 1.04% 1.16% 1.17%
RA 0.02% 0.02% 0.02% 0.04% 0.04% 0.02% 0.04% 0.04% 0.04% 0.03%
FR mo gage WA 0.25% 0.23% 0.46% 0.60% 0.89% 1.18% 1.77% 2.01% 2.65% 3.01%
RA 0.05% 0.08% 0.09% 0.13% 0.14% 0.16% 0.13% 0.17% 0.22% 0.26%
E Poo HTM WA 2.08% 1.37% 1.09% 0.96% 0.61% 0.50% 0.47% 0.25% 0.13% 0.06%
RA 0.42% 0.79% 0.44% 0.21% 0.15% 0.11% 0.05% 0.03% 0.04% 0.00%
Weal hy HTM WA 1.12% 0.89% 1.32% 1.46% 1.98% 1.96% 2.30% 2.46% 2.49% 2.40%
RA 0.47% 0.57% 0.51% 0.39% 0.37% 0.32% 0.22% 0.20% 0.19% 0.15%
Non HTM WA 3.95% 2.63% 3.35% 3.84% 4.06% 4.33% 4.64% 5.14% 5.49% 5.78%
RA 1.96% 3.75% 3.32% 3.14% 2.83% 2.74% 2.32% 1.96% 1.63% 1.60%
F E ec i e πWA 17.35% 16.57% 16.27% 16.19% 15.94% 15.76% 15.71% 15.48% 15.27% 14.91%
RA 14.84% 15.19% 14.88% 15.04% 14.48% 14.59% 14.34% 14.27% 14.37% 13.82%
No es: WA: wo king-age (<65 yea s old) indi iduals, RA: e i emen -age (65+ yea s old) indi iduals. The
numbe s apply o he six-coun y a e age.
20
4 The impac o he Cos -o -Li ing C isis
In his sec ion, we analyse he impac o he cos -o -li ing c isis on households in he Eu ozone.
In ou baseline esul s, we s udy he magni ude o hese e ec s on eal weal h h ough he
channels p e iously iden i ied, sepa a ely o each income decile and age g oup. In a second
s ep, in Sec ion (5), we ex end ou analysis by conside ing a ious o he subg oups, depending
on cha ac e is ics such as liquid asse s, housing and mo gage s a us.
4.1 E ec s o In la ion Th ough Consump ion, Income and Nominal Weal h
We begin ou analysis conside ing he impac o he in la iona y su ge on households ac oss he
income dis ibu ion h ough he ela i e consump ion, nominal income and Fishe channels
desc ibed abo e and summa ised in Equ. (7).
Table (3) summa ises he main esul s o he Eu ozone, as p oxied by ou six coun ies o in-
e es (i.e. Ge many, F ance, I aly, Spain, G eece and Po ugal), which oge he ep esen abou
85% o Eu ozone GDP. Mos impo an ly, he esul s poin owa ds a s iking di e ence in
he ex en o he exposu e be ween wo king-age and e i emen -age households. On a e age,
pension-age households los nea ly h ee imes as much as hei wo king-age coun e pa s.
This is mainly d i en by he Fishe e ec , which implies a de alua ion o nominal weal h o
abou 8% in he case o pension-age households, who end o hold la ge s ocks o posi i e
ne nominal asse s. This is in sha p con as o he e alua ion o nominal weal h o abou 4%
o he g oup o wo king-age households, as a esul o he ac ha households in his g oup
hold on a e age nega i e ne nominal asse balances. Al oge he , wo king-age households su -
e ed an a e age loss om in la ion amoun ing o ca. 6% o hei disposable income, whe eas
he e ec o hose in pension-age amoun ed o 16%. These di e ences a e consis en wi h he
indings o he ecen li e a u e e iewed in he in oduc ion sec ion.
Ano he impo an inding is he gap be ween high and low-income households. Ou esul s
sugges a eg essi e impac among wo king-age households, wi h he lowes deciles su e -
ing be ween ou o i e imes he impac bo ne by he highes deciles. In con as , he im-
pac appea s a he la among pension-age households, wi h households in his g oup expe-
iencing losses o simila magni udes ac oss he income dis ibu ion. This esul is ela ed o
di e ences in income and asse de alua ions be ween age g oups. On he nominal income
side, pensions ha e g own ela i ely homogeneously ac oss he income dis ibu ion ollowing
21
he in la iona y shock, whe eas income g ow h was highe among high-income wo king-age
households.17 Conce ning he balance o nominal asse s and liabili ies, wo king-age house-
holds in high-income deciles a e mo e likely o ha e posi i e mo gage balances and o bene i
om he la ge deb de alua ion om in la ion. On he o he hand, pensione s ac oss all income
deciles gene ally do no ha e mo gages and hold posi i e nominal asse balances, hence a e
loosing ou by a simila magni ude ( ela i e o hei income) ac oss he income dis ibu ion.
Taken oge he , hese ac o s a e esponsible o he signi ican di e ence in he eg essi i y o
in la ion e ec s be ween age g oups.
Finally, wi h espec o he in la ion exposu e esul ing om decile-speci ic consump ion pa -
e ns ( he ela i e consump ion channel), we ind ha households in he bo om income deciles,
bo h in wo king and e i emen -age g oups, a e mo e exposed han highe income households
o p ice inc eases on goods such as uel and elec ici y, ha ha e ea u ed abo e-a e age p ice
ises, as documen ed in o he s udies (see, e.g., Amo es e al.,2023b). In mone a y e ms, his
is equi alen o a loss o app oxima ely 1.9% and 1.7%, espec i ely, o disposable income o
households in he i s income decile, as compa ed o he coun y a e age. The consump ion
channel is no iceably smalle in magni ude han he Fishe and income channels.
Figu e (1) shows he e ec s o in la ion by income and age g oup o he Eu ozone as a whole
and o each coun y sepa a ely. As i can be seen om he igu e, he di e ences in he e ec s
o in la ion ac oss age and income g oups discussed abo e a e p esen in all coun ies: pension-
age households end o expe ience signi ican ly la ge losses han hei wo king-age coun e -
pa s. Mo eo e , among wo king-age households, he impac o in la ion appea s eg essi e,
wi h low-income households su e ing he g ea es losses. Ac oss coun ies, di e ences in he
dis ibu ion o ne nominal asse posi ions a e he key d i e o he di e ences in he magni-
ude and he eg essi e na u e o he impac o in la ion. Fo ins ance, compa ing he case o
Ge man and G eek pensione s, i can be seen ha he de alua ion o la ge asse balances led o
a signi ican loss o beyond 20% o disposable income o he Ge man middle-income pension-
age households, whe eas G eek pension-age households su e ed losses which a e only abou
hal o ha size, due o hei smalle nominal asse posi ions. A he o he ex eme, nega-
i e ne nominal asse posi ions among highe -income wo king-age households in F ance and
Spain imply ha hese households e en bene i ed om he in la iona y shock.
17This ac can be app ecia ed in Figu e A.2 in he Appendix o his pape , whe e we plo he alue o λ( om
Equ. (2)) by age and income g oups in each coun y.
22
hei la ge asse balances which a e posi i ely exposed o highe in e es a es. Al oge he , a
he Eu ozone le el, we obse e a eg essi e impac o he in e es a e esponse.21
A he coun y le el, Figu e (3) sugges s ha in mos coun ies he URE ends o g adually
inc ease along he income dis ibu ion and i is posi i e o pension-age households. Hence
he impac o in e es a e inc eases is eg essi e in all coun ies, wi h low-income wo king-
age households ypically su e ing om in e es a e inc eases, whe eas high-income pension-
age households a e he main winne s. The e is, howe e , a subs an ial deg ee o a ia ion
ac oss coun ies in he magni ude o he impac . The la ges nega i e e ec s a e su e ed by
households in he i s income decile in Spain (wo king-age only) and G eece (bo h age g oups)
expe iencing a loss o 5% o 7% o disposable income, while he impac is close o ze o o low-
income wo king-age households in Ge many. On he o he hand, he highes income pension-
age households in Spain a e he ones bene i ing he mos om inc eases in a es hanks o a
la ge s ock o weal h ( ela i e o hei income) exposed o he highe in e es a e. Looking a
he decomposi ion o he URE by coun y (see Figu e (A.6) in he Appendix) and income decile,
consump ion in excess o income (i.e. nega i e ne sa ings) is o en esponsible o he bigge
sha e o he URE in he i s decile and pa icula ly so in G eece, Spain and I aly. Mo eo e ,
c oss-coun y di e ences in he URE – and by his accoun wi h espec o he impac o ising
in e es a es – can be aced back o he p e alence o adjus able- a e mo gage ypes in some
coun ies as opposed o ixed- a e ones (see in pa icula Po ugal and Spain).
21We should howe e be cau ious in he in e p e a ion o his esul , as ou analysis abs ac s om he e ec o
in e es a e hikes on in la ion. I is he e o e likely ha households su e ing he mos om he di ec e ec s o
in e es a es ha e bene i ed o a la ge ex en om he ac ha he mone a y policy esponse p e en ed in la ion
om inc easing u he . S udying he impac o hose second- ound e ec s goes beyond he scope o his pape ;
we lea e his o u he esea ch.
29

TABLE 5: In e es Ra e Impac by Income Decile o Eu ozone Households in 2022
Unhedged In e es Financial gain/loss
Income decile Ra e Exposu e (URE) om in e es a e hike
(in % o disp. income) (in % o disp. income)
Wo king-age
1−40.76 −1.83
2−14.42 −0.65
3−24.05 −1.08
4−5.35 −0.24
5−4.78 −0.22
6−1.61 −0.07
7 1.87 0.08
8 11.70 0.53
9 22.85 1.03
10 40.54 1.82
Pension-age
1 18.57 0.84
2 30.07 1.35
3 35.47 1.60
4 53.04 2.39
5 52.66 2.37
6 70.87 3.19
7 84.19 3.79
8 84.03 3.78
9 101.47 4.57
10 124.17 5.59
No es: The able epo s o each income decile he exposu e o in e es a e changes, as measu ed
by he unhedged in e es a e exposu e (URE) in % o disposable income, and he ac ual inancial
impac esul ing om he in e es a e hike in % o disposable income. The ac ual mone a y
impac om he in e es a e hike be ween mid-2021 and end-2023 is ob ained by mul iplying
he decile-speci ic URE by 4.5% (see Equ. (9)). A nega i e numbe signals a nega i e exposu e o
ising in e es a es, while posi i e ones indica e gains. The igu es a e he weigh ed a e age o
six coun ies, which a e F ance, Ge many, G eece, I aly, Po ugal and Spain.
30
FIGURE 3: In e es Ra e Impac on Households Ac oss he Eu ozone
(A) Eu ozone
-2.5
0
2.5
5
7.5
12345678910 12345678910
Wo king Age Pension Age
in % o disposable income
(B) F ance
-10
-5
0
5
10
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(C) Ge many
-10
-5
0
5
10
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(D) G eece
-10
-5
0
5
10
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(E) I aly
-10
-5
0
5
10
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(F) Po ugal
-10
-5
0
5
10
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(G) Spain
-10
-5
0
5
10
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
No es: The igu e shows o each income decile he mone a y loss om an inc ease in he in e es a e by 4.5%.
Panel (3A) shows he weigh ed a e age e ec s ac oss he six selec ed coun ies.
31
4.3 Rela i e gains and losses om he cos -o -li ing c isis
This sec ion b ings oge he he analysis o he di ec e ec s o in la ion and he impac om
iscal and mone a y policy esponses, o assess he o e all impac o he cos -o -li ing c isis on
Eu o A ea households. The combined esul s a e displayed in Figu e (4) bo h o he Eu ozone
as a whole and o he indi idual coun ies.
S a ing wi h he Eu ozone as a whole (Panel (4A)), ou esul s indica e ha he eg essi e
di ec e ec s o in la ion p e ail among he wo king-age popula ion. While his was pa ially
dampened by suppo ing iscal policy measu es, he ise in in e es a es has ein o ced he
eg essi e e ec s o he c isis o his popula ion g oup. O e all, he loss o wo king-age
households anges om 10% o disposable income o low-income households o i ually
ze o o high-income households. In con as , among pension-age households, he impac was
isibly less eg essi e in na u e, and al hough he inc ease in a es had a mos ly bene icial
e ec , he la ge de alua ion o nominal balances induced by in la ion implied ha , ac oss he
income dis ibu ion, pension-age households we e he mos a ec ed, wi h a loss o beyond
10%.
A he coun y le el, ou esul s indica e ha iscal policy measu es in Po ugal ha e en i ely
o se he e ec o in la ion on wo king-age households. By he end o 2023, Po uguese house-
holds in his age g oup we e in mos cases ully compensa ed. In con as , eg essi e pa e ns
a e s ill isible in mos coun ies among wo king-age households wi h low-income households
expe iencing losses o abou 8% o 10% o disposable income in Ge many, I aly and Spain,
whe eas high-income households a e equally well o e en be e o , as in he case o F ance.
As o pension-age households, hey end o display simila losses ac oss income g oups and
coun ies o abou and beyond 10%.
32
FIGURE 4: The Impac o he Cos -o -Li ing C isis on Households in he Eu ozone
(A) Eu ozone
-30
-20
-10
0
10
20
30
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Fishe e ec Nom. income channel Rel. consump ion channel
Fiscal measu es Mone a y measu es To al e ec
Wo king Age Pension Age
in % o disposable income
(B) F ance
-30
-20
-10
0
10
20
30
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(C) Ge many
-30
-20
-10
0
10
20
30
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(D) G eece
-30
-20
-10
0
10
20
30
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(E) I aly
-30
-20
-10
0
10
20
30
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(F) Po ugal
-30
-20
-10
0
10
20
30
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
(G) Spain
-30
-20
-10
0
10
20
30
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Wo king Age Pension Age
in % o disposable income
No es: The igu e shows o each income decile he mone a y loss om in la ion ela i e o disposable income
h ough a e alua ion o nominal asse s (Fishe e ec ), nominal income and consump ion, oge he wi h he e -
ec esul ing om iscal and mone a y esponses. Panel (4A) shows he weigh ed a e age e ec s ac oss he six
selec ed coun ies.
33
5 The Role o Weal h and i s Composi ion
In he p e ious sec ion, we analysed he e ec s o he cos -o -li ing c isis on a ious age and
income subg oups o Eu o A ea households. We now ex end he analysis by looking a how
addi ional cha ac e is ics in luence he exposu e o households o in la ion and he policy e-
sponse, ocusing on cha ac e is ics ela ed o weal h and i s composi ion. In pa icula , we
look a he e ec s o home owne ship, he mo gage s a us and he ‘hand- o-mou h’ s a us o
households, as p oxied by hei le els o liquid weal h holdings.
Housing In Sec ion (4), we epo ed la ge di e ences in he e ec s o in la ion h ough he
Fishe channel ac oss age g oups. We ound ha , on a e age, wo king-age households bene i
om in la ion h ough his channel because o nega i e ne nominal posi ions, while pension-
age households lose om he de alua ion o hei nominal asse s. In Figu e (5), we depic
he e ec s o he c isis as a unc ion o he home-owne ship s a us o each age-income decile
g oup. We can see om he igu e ha , when accoun ing o home owne ship, he gains om
he Fishe e ec wi hin he wo king-age popula ion (le panels) a e d i en by he e ec o he
shock on homeowne s, who bene i he mos om in la ion. Those e ec s a e non-mono onic
o e income deciles: he home-owne s bene i ing he mos om he e alua ion o nominal
liabili ies a e hose in middle-income deciles, he e ec being as high as 10% o disposable
income in he 7 h income decile. Home-owne s in low-income deciles appea o gain e y li le,
and e en lose in he case o he i s decile. Non-homeowne s ha e on a e age posi i e ne
nominal asse posi ions in all income deciles. As a esul , wo king-age households in his g oup
lose om in la ion h ough he Fishe e ec , as is he case o he e i emen -age g oup.
Looking a he pension-age popula ion ( igh panels), he e ec s o in la ion a e e y homoge-
neous ac oss home-owne ship g oups. This makes he home-owne ship s a us a poo p edic o
o he e ec s o he c isis on pension-age indi iduals.
34

FIGURE 5: E ec s o Cos -o -Li ing C isis Ac oss Popula ion Subg oups and Housing S a us
-20
-10
0
10
20
12345678910 12345678910 12345678910 12345678910
Non-Home Owne s Home Owne s Non-Home Owne s Home Owne s
Fishe e ec Nom. income channel Rel. consump ion channel
Fiscal measu es Mone a y measu es To al e ec
Wo king Age Pension Age
in % o disposable income
No es: The igu e shows he mone a y loss om in la ion as a sha e o disposable income h ough a e alua ion
o nominal asse s (Fishe e ec ), nominal income and consump ion, oge he wi h he e ec esul ing om iscal
and mone a y esponses. The igu e shows he weigh ed a e age e ec s ac oss he six selec ed coun ies.
Mo gages The s a k di e ence in he ole played by home owne ship ac oss age g oups can
be explained by accoun ing o he mo gage s a us o indi iduals mo e explici ly. As i can
be seen om looking a Table (2), only abou 8% o he e i emen -age popula ion has posi i e
mo gage balances. Fo he wo king-age popula ion, his sha e is equal o 60%. Mo eo e , con-
di ional on ha ing a mo gage, he a e age alue o he emaining mo gage balance is equal o
198% o disposable income o wo king-age households, and o 156% o hei e i emen -age
coun e pa .
Figu e (6) displays he e ec s o he c isis on households condi ional on hei mo gage s a us.22
F om he igu e, we clea ly see ha mo gage holdings a e a s ong p edic o o he exposu e
o in la ion h ough he Fishe channel. Fo mo gage holde s, he gains om in la ion co-
mo e nega i ely wi h income, wi h low-income households expe iencing he la ges gains as
a ac ion o hei disposable income. The e ec s a e s ong in magni ude, wi h mo gagees in
he i s decile seeing hei ne weal h e alued upwa ds by app oxima ely 35%.
22The e y low epo ed sha e o e i emen -age households wi h a mo gage implies e y noisy numbe s when
compu ing he e ec s on his g oup o indi iduals. The e o e, he igu e only displays esul s o e i emen -age
households wi hou mo gages.
35
Condi ional on ha ing posi i e mo gage balances, we show in he Appendix he e ec s o
ha ing a ixed- a e s. adjus able- a e mo gage con ac . We ind ha gains om he Fishe
e ec a e simila ac oss households wi h ixed and adjus able- a e con ac s. Howe e , he
gains o households wi h adjus able- a e mo gages a e pa ially o se by he losses hey ace
om highe in e es a es, gi en hei la ge nega i e URE, e lec ing he ac ha in e es pay-
men s on mo gages wi h adjus able a e inc ease ollowing a mone a y igh ening. Gi en he
s ong c oss-coun y di e ences in he ype o he a e age mo gage con ac (as can be seen
om he coun y-speci ic popula ion dis ibu ion ables in Sec ion (C.1) o he Appendix),23
losses associa ed wi h ha ing an adjus able- a e mo gage a e highly concen a ed in coun ies
such as Spain and Po ugal.
We p esen coun y-speci ic esul s on he e ec s ac oss housing and mo gage g oups in he
Appendix (Figu es (A.3) and (A.4)). O e all, we ind ha he esul s a he coun y le el ea-
u e s iking simila i ies: he g oup o wo king-age home-owne s, and in pa icula hose wi h
ou s anding mo gages, ha e seen hei weal h being de alued leas o e en gained, as is he
case o mo gage holde s. On he o he hand, households wi hou mo gages, bo h in wo king
and pension age, ha e expe ienced weal h losses o e y simila magni udes. In e ms o di e -
ences ac oss he six coun ies, we no ice somewha smalle nega i e weal h e ec s on mo gage
holde s in F ance and Ge many om he in e es a e esponse, gi en he dominance o ixed-
a e mo gage egimes (c . Sec ion (C.1) o he coun y-speci ic sha es o mo gage ypes by
income decile).
23Those di e ences ha e also been documen ed in he li e a u e, see e.g. Pica (2021).
36
FIGURE 6: E ec s o he Cos -o -Li ing C isis Ac oss Popula ion Subg oups and Mo gage
S a us
-20
0
20
40
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
No Mo gage Mo gage No Mo gage
Fishe e ec Nom. income channel Rel. consump ion channel
Fiscal measu es Mone a y measu es To al e ec
Wo king Age Pension Age
in % o disposable income
No es: The igu e shows he mone a y loss om in la ion as a sha e o disposable income h ough a e alua ion
o nominal asse s (Fishe e ec ), nominal income and consump ion, oge he wi h he e ec esul ing om iscal
and mone a y esponses. The igu e shows he weigh ed a e age e ec s ac oss he six selec ed coun ies.
Hand- o-mou h s a us In Figu e (7) we spli he popula ion in o households conside ed as
being ‘Hand- o-Mou h’ (i.e. holding no o li le amoun s o liquid asse s) o no . The lack o
liquid weal h exposes households o luc ua ions in hei ea nings, implying ha hey ypi-
cally ha e a high ma ginal p opensi y o consume ou o ansi o y ea nings shocks. Knowing
whe he hand- o-mou h households a e mo e a ec ed by he c isis is he e o e o in e es o
he design o he policy esponse o he in la iona y shock.
Wi hin he g oup o H M households, we u he dis inguish be ween hose wi h posi i e illiq-
uid weal h, he ‘weal hy H M’ households ( ypically owning housing weal h inanced wi h
mo gage deb ) and he ‘poo H M’ wi h no illiquid weal h.24 The esul s closely mi o hose
ob ained looking a he housing and mo gage s a us: non-H M households ha e been nega-
i ely a ec ed by in la ion h ough a de alua ion o hei nominal asse s. Poo H M consume s
a e p o ec ed om he Fishe e ec as hey hold, by de ini ion, no ne nominal asse s. The o al
e ec , howe e , is nega i e and o simila magni ude in bo h cases. Weal hy H M consume s,
24This classi ica ion ollows he in luen ial wo k o Kaplan and Violan e (2014).
37
FIGURE 7: E ec s o he Cos -o -Li ing C isis Ac oss Popula ion Subg oups and Hand- o-
Mou h S a us
-20
0
20
40
12345678910 12345678910 12345678910 12345678910 12345678910 12345678910
Non-H M Poo H M Weal hy H M Non-H M Poo H M Weal hy H M
Fishe e ec Nom. income channel Rel. consump ion channel
Fiscal measu es Mone a y measu es To al e ec
Wo king Age Pension Age
in % o disposable income
No es: The igu e shows he mone a y loss om in la ion as a sha e o disposable income h ough a e alua ion
o nominal asse s (Fishe e ec ), nominal income and consump ion, oge he wi h he e ec esul ing om iscal
and mone a y esponses. The igu e shows he weigh ed a e age e ec s ac oss he six selec ed coun ies.
on he o he hand, bene i om a subs an ial de alua ion o hei nominal liabili ies, lea ing
hose households wi h an o e all gain o a ound 8% o disposable income on a e age.
Ne wo h Figu e 8depic s he impac o he cos -o -li ing c isis along deciles o he ne
weal h dis ibu ion ( a he han disposable income as in he baseline esul s). Mos o he
a ia ions in he e ec s o in la ion ac oss weal h g oups can be explained h ough di e ences
in exposu es h ough he e alua ion o ne nominal posi ions ( he Fishe e ec ). Compa ing
he e ec s o he wo age g oups, esul s a e simila o hose p esen ed in Figu e (4): pension-
age households ace on a e age subs an ial losses h ough he Fishe e ec , while wo king-age
households end o bene i om i . Howe e , i can be seen om he igu e ha some pension-
age indi iduals in low-weal h deciles gain om he Fishe e ec , due o hei nega i e nominal
asse posi ions. Fo pension-age households, losses om in la ion inc ease wi h he le el o
weal h, as weal hie indi iduals in his age g oup su e mo e om he de alua ion o hei
nominal asse holdings, which a e inc easing wi h weal h. Fo wo king-age households, he
e ec s a e non-mono onic ac oss ne weal h deciles, wi h middle-weal h households su e ing
38
Fiscal impac We conside he e ec s o changes in disc e iona y measu es (“income-side
measu es”) ˜
Tj, , oge he wi h changes in consump ion axes (“p ice-side measu es”) on indi-
idual goods, τc
k, . Using 1 +πk, =1+τc
k,
1+τc
k, −1
Pk,
Pk, −1≈τc
k, −τc
k, −1+˜
πk, , 1 +π =1+τc
1+τc
−1
P
P −1≈
τc
−τc
−1+˜
π , we ge he ollowing exp ession om di e en ia ing (A.1) w τc
k, ,τc
and
˜
Tj, :
da(τ)
j, =d˜
Tj, +cj. ∑
k
ωj,k, dτc
k−dτc+∑
s≥0
Q( +s)
B( +s)
j, −1+ (1−λj, )y( )
j, −1dτc.
Re-a anging and using he NNP de ini ion, we ge equa ion (8) in he main ex .
In e es a e impac To ob ain da(R)
j, , i s no ice ha , gi en ou assump ions, all bond p ices
mo e equally by he amoun dQ( +s)
Q( +s)=dq( +s)
q( +s)=−dR
R o all s≥1.
To compu e he e ec o a change in in e es a es, we conside a change in he alue o goods
oday in omo ow’s e ms (Q( )
, which so a was no malised o one), a he han he change
in omo ow goods in oday’s e m.26 To do so, we conside he e ec o a dR inc ease in Q( )
(so a no malised o ones) a he han a dR dec ease in Q( +s)
o s≥1, which we no malise
o one. In his case, he household budge cons ain (A.1) can be w i en as:
aj, =Q( )
"yj, +b( )
j, −1+1
1+π
B( )
j, −1+˜
Tj, −cj, ∑
k
ωj,k,
1+πk,
1+π #
+1
1+π ∑
s≥1
Q( +s)
B( +s)
j, −1+∑
s≥1
(1+π)sq( +s)
b( +s)
j, −1
=Q( )
UREj, +1
1+π ∑
s≥1
Q( +s)
B( +s)
j, −1+∑
s≥1
(1+π)sq( +s)
b( +s)
j, −1
whe e aj, is now exp essed in e ms o oday’s goods Q( )
. F om his equa ion, we ge :
da(R)
j, =UREj, dQ( )=UREj, dR
which is he equa ion s a ed in he main ex .
26Aucle (2019) uses a simila a gumen o compu e he e ec s o mone a y policy on household consump ion.
45

B Da a and Empi ical Cons uc ion o Va iables
B.1 Compu ing he Ne Nominal Asse Posi ion (NNP)
We ollow he app oach in Doepke and Schneide (2006) and Pallo i e al. (2023) and de ine
he “Ne Nominal Asse Posi ion” (NNP) as he di e ence be ween he sum o nominal asse s,
comp ising deposi s, bonds and money owned o he household, and he sum o liabili ies.
Liabili ies include bo h mo gage deb and non-mo gage deb (c edi lines, c edi ca ds and
o he non-colla e alized loans). Table (A.1) p o ides de ails on he speci ic a iables ha we e
used o cons uc he NAP based on HFCS da a.
TABLE A.1: Cons uc ion o he Ne Nominal Asse Posi ion (NNP) om HFCS Da a
HFCS Va iable Desc ip ion
Nominal asse s
HD1110 Value o sigh accoun
HD1210 Value o sa ing accoun s
DA2103 Bonds
HD1701 Money owed o households
Nominal liabili ies
DL1110 Ou s anding balance o households’ main esidence mo gages
DL1120 Ou s anding balance o mo gages on o he p ope ies
DL1210 Ou s anding balance o c edi line/o e d a
DL1220 Ou s anding balance o c edi ca d deb
DL1231 Ou s anding balance o p i a e loans
DL1232 Ou s anding balance o o he non-p i a e non-colla e alised loans
No es: The a iable names e e o he hi d wa e o he Household Finance and Consump ion Su ey (HFCS).
B.2 Compu ing he Unhedged In e es Ra e Exposu e (URE)
The ollowing able p o ides de ails on he speci ic a iables ha we e used o cons uc he
URE. This app oach ollows closely he elabo a ions in Tzamou ani (2021).
46
TABLE A.2: Cons uc ion o Componen s o he Unhedged In e es Ra e Exposu e (URE)
HFCS Va iable Desc ip ion Adjus men
Ne Income
DI2000 To al household g oss income Ne income ob ained om ne - o-g oss
income a ios om EUROMOD (2023)
Consump ion
Consump ion- o-ne -income a ios ob ained om HBS
by coun y and income decile, applied o ne income abo e.
HB2300 (Mon hly) amoun paid as en ×12 o ob ain annual alue
Liabili ies
DL1110a Ou s anding balance o adjus able in e es a e HMR mo gages
DL1120a Ou s anding balance o adjus able in e es a e mo gage
on o he p ope ies
DL1200 Ou s anding balance o o he , non-mo gage deb
HB170x, x={1, 2, 3}Fixed a e mo gage 1, 2 o 3 on household’s
main esidence wi h ma u i y o 1 yea o less (HB171x ≤1)
HB370xy, x,y={1, 2, 3}O he ixed a e mo gage 1, 2 o 3 on household’s o he
p ope ies 1, 2 o 3 wi h ma u i y o 1 yea o less (HB371xy ≤1)
Asse s
HD1110 Value o sigh accoun s
HD1210 Value o sa ing accoun s ×0.8
HD1320b Value o mu ual unds in es ed in bonds ×0.9
HD1320c Value o mu ual unds in es ed in money ma ke ×0.9
HD1420 Value o bonds Mul iplied wi h espec i e sha e by coun y,
see Tzamou ani (2021, Table A1)
HD1620 alue o addi ional asse s in managed accoun s ×0.9
No es: All a iable names e e o he hi d wa e o he Household Finance and Consump ion Su ey (HFCS).
47
B.3 Iden i ying Hand- o-Mou h Households
Fo he classi ica ion o households in o H M s a us we ollow Almg en e al. (2022) and Kaplan
e al. (2014). A household is classi ied as H M i i s ne balance o liquid weal h is smalle
han a ce ain sha e o mon hly income. Following he au ho s’ no a ion, le mideno e ne
liquid asse s, yideno e income, and mibe a c edi limi o household i, which is se o be he
household’s mon hly income. Then, a household is ca ego ized as H M i
0≤mi≤yi
2,
o i
0≤mi, and mi≤yi
2−mi.
Wi hin he g oup o H M households, we dis inguish be ween ‘weal hy’ and ‘poo ’. Weal hy
H M ha e a posi i e ne illiquid weal h balance, while poo H M ha e ze o o nega i e ne
illiquid weal h balances.
48
C Addi ional Tables
C.1 Popula ion Dis ibu ion Ac oss Income Deciles in Indi idual Coun-
ies
F ance
TABLE A.3: Popula ion Dis ibu ion Ac oss Income Deciles in F ance
Decile 1 2 3 4 5 6 7 8 9 10
A All WA 7.82% 5.91% 6.12% 6.62% 6.28% 6.68% 7.14% 7.54% 7.87% 8.03%
RA 2.19% 4.09% 3.94% 3.31% 3.75% 3.29% 2.86% 2.45% 2.14% 1.96%
B Home-owne WA 2.04% 1.50% 1.91% 2.51% 3.09% 3.75% 5.06% 5.88% 6.94% 7.43%
RA 1.26% 1.82% 2.28% 2.39% 3.01% 2.84% 2.58% 2.31% 1.89% 1.91%
Non owne WA 5.78% 4.41% 4.21% 4.11% 3.19% 2.93% 2.09% 1.66% 0.92% 0.60%
RA 0.94% 2.27% 1.66% 0.91% 0.74% 0.45% 0.28% 0.14% 0.25% 0.05%
C Mo gage WA 0.50% 0.51% 0.93% 1.27% 1.79% 2.24% 3.20% 3.78% 4.43% 5.05%
RA 0.04% 0.07% 0.08% 0.09% 0.15% 0.11% 0.25% 0.20% 0.22% 0.26%
No mo gage WA 1.54% 0.99% 0.98% 1.24% 1.30% 1.51% 1.85% 2.10% 2.52% 2.38%
RA 1.21% 1.75% 2.20% 2.30% 2.86% 2.73% 2.34% 2.11% 1.68% 1.65%
Non owne WA 5.78% 4.41% 4.21% 4.11% 3.19% 2.93% 2.09% 1.66% 0.92% 0.60%
RA 0.94% 2.27% 1.66% 0.91% 0.74% 0.45% 0.28% 0.14% 0.25% 0.05%
D AR mo gage WA 0.04% 0.01% 0.07% 0.09% 0.10% 0.07% 0.19% 0.23% 0.22% 0.28%
RA 0.00% 0.00% 0.00% 0.03% 0.02% 0.00% 0.00% 0.01% 0.01% 0.00%
FR mo gage WA 0.46% 0.50% 0.85% 1.18% 1.69% 2.17% 3.02% 3.55% 4.20% 4.77%
RA 0.04% 0.07% 0.08% 0.06% 0.14% 0.11% 0.25% 0.19% 0.20% 0.26%
E Poo HTM WA 1.73% 1.68% 1.36% 1.17% 0.85% 0.80% 0.47% 0.33% 0.15% 0.04%
RA 0.27% 0.57% 0.49% 0.25% 0.16% 0.14% 0.03% 0.03% 0.04% 0.00%
Weal hy HTM WA 1.14% 0.82% 1.07% 1.41% 1.88% 2.11% 2.58% 2.84% 2.88% 2.83%
RA 0.22% 0.37% 0.49% 0.36% 0.33% 0.25% 0.30% 0.15% 0.16% 0.14%
Non HTM WA 4.94% 3.40% 3.69% 4.04% 3.55% 3.77% 4.10% 4.38% 4.84% 5.16%
RA 1.70% 3.15% 2.96% 2.70% 3.26% 2.91% 2.52% 2.27% 1.94% 1.82%
F E ec i e πWA 15.07% 15.01% 14.97% 15.06% 14.93% 14.89% 14.81% 14.65% 14.49% 14.41%
RA 16.64% 16.48% 16.45% 16.14% 16.04% 15.88% 15.91% 15.77% 15.16% 15.24%
No es: WA: Wo king-age (<65 yea s old) indi iduals, RA: Re i emen -age (65+ yea s old) indi iduals.
49
Ge many
TABLE A.4: Popula ion Dis ibu ion Ac oss Income Deciles in Ge many
Decile 1 2 3 4 5 6 7 8 9 10
A All WA 7.22% 5.21% 5.58% 6.33% 6.63% 7.14% 7.87% 8.49% 8.67% 8.66%
RA 2.79% 4.80% 4.43% 3.70% 3.37% 2.81% 2.13% 1.56% 1.28% 1.32%
B Home-owne WA 0.56% 0.74% 1.64% 2.00% 2.57% 3.05% 4.18% 5.65% 6.34% 7.29%
RA 0.78% 1.35% 2.30% 2.29% 1.86% 2.06% 1.56% 1.24% 1.09% 1.22%
Non owne WA 6.66% 4.46% 3.94% 4.32% 4.06% 4.09% 3.69% 2.84% 2.33% 1.37%
RA 2.01% 3.44% 2.14% 1.41% 1.51% 0.74% 0.57% 0.32% 0.19% 0.11%
C Mo gage WA 0.16% 0.15% 0.57% 0.56% 1.11% 1.80% 2.42% 3.05% 4.20% 4.57%
RA 0.09% 0.10% 0.15% 0.28% 0.27% 0.27% 0.15% 0.27% 0.32% 0.37%
No mo gage WA 0.40% 0.59% 1.07% 1.44% 1.45% 1.25% 1.76% 2.60% 2.14% 2.72%
RA 0.69% 1.26% 2.14% 2.02% 1.59% 1.79% 1.40% 0.97% 0.77% 0.84%
Non owne WA 6.66% 4.46% 3.94% 4.32% 4.06% 4.09% 3.69% 2.84% 2.33% 1.37%
RA 2.01% 3.44% 2.14% 1.41% 1.51% 0.74% 0.57% 0.32% 0.19% 0.11%
D AR mo gage WA 0.06% 0.02% 0.25% 0.04% 0.29% 0.34% 0.25% 0.56% 0.50% 0.57%
RA 0.02% 0.00% 0.02% 0.03% 0.01% 0.00% 0.03% 0.02% 0.01% 0.04%
FR mo gage WA 0.10% 0.13% 0.32% 0.52% 0.82% 1.46% 2.17% 2.49% 3.70% 4.00%
RA 0.07% 0.09% 0.14% 0.25% 0.26% 0.27% 0.13% 0.26% 0.30% 0.33%
E Poo HTM WA 1.95% 1.56% 1.03% 0.99% 0.42% 0.49% 0.51% 0.30% 0.07% 0.07%
RA 0.54% 1.31% 0.55% 0.21% 0.22% 0.08% 0.03% 0.05% 0.00% 0.00%
Weal hy HTM WA 0.36% 0.74% 1.27% 1.29% 2.13% 1.90% 1.96% 2.49% 2.37% 2.37%
RA 0.17% 0.11% 0.38% 0.28% 0.30% 0.25% 0.09% 0.14% 0.08% 0.15%
Non HTM WA 4.91% 2.91% 3.29% 4.04% 4.07% 4.75% 5.39% 5.70% 6.24% 6.23%
RA 2.08% 3.38% 3.50% 3.21% 2.85% 2.48% 2.00% 1.38% 1.20% 1.17%
F E ec i e πWA 18.72% 18.05% 17.69% 17.53% 17.39% 17.30% 17.29% 17.21% 17.01% 16.54%
RA 18.98% 18.48% 18.08% 17.99% 17.81% 17.58% 17.39% 16.82% 16.39% 15.75%
No es: WA: Wo king-age (<65 yea s old) indi iduals, RA: Re i emen -age (65+ yea s old) indi iduals.
50

G eece
TABLE A.5: Popula ion Dis ibu ion Ac oss Income Deciles in G eece
Decile 1 2 3 4 5 6 7 8 9 10
A All WA 6.64% 4.75% 5.88% 5.54% 6.55% 5.94% 6.61% 7.32% 7.84% 8.30%
RA 3.37% 5.25% 4.13% 4.47% 4.06% 3.52% 3.33% 2.66% 2.15% 1.69%
B Home-owne WA 3.59% 2.84% 3.21% 3.33% 4.11% 4.77% 4.89% 6.22% 6.27% 7.84%
RA 2.61% 4.33% 3.57% 4.15% 3.69% 3.36% 3.31% 2.62% 2.11% 1.58%
Non owne WA 2.84% 1.92% 2.68% 2.23% 2.46% 1.19% 1.74% 1.12% 1.59% 0.48%
RA 0.74% 0.93% 0.57% 0.33% 0.38% 0.16% 0.03% 0.05% 0.04% 0.12%
C Mo gage WA 0.85% 0.34% 0.71% 0.71% 0.68% 0.67% 0.86% 1.58% 1.05% 1.84%
RA 0.09% 0.08% 0.07% 0.15% 0.23% 0.16% 0.04% 0.18% 0.11% 0.31%
No mo gage WA 2.74% 2.50% 2.50% 2.62% 3.43% 4.10% 4.02% 4.64% 5.22% 6.00%
RA 2.52% 4.25% 3.50% 4.00% 3.46% 3.20% 3.27% 2.44% 2.00% 1.26%
Non owne WA 2.84% 1.92% 2.68% 2.23% 2.46% 1.19% 1.74% 1.12% 1.59% 0.48%
RA 0.74% 0.93% 0.57% 0.33% 0.38% 0.16% 0.03% 0.05% 0.04% 0.12%
D AR mo gage WA 0.39% 0.16% 0.44% 0.39% 0.34% 0.36% 0.49% 0.74% 0.58% 1.01%
RA 0.07% 0.03% 0.03% 0.05% 0.04% 0.09% 0.04% 0.07% 0.00% 0.06%
FR mo gage WA 0.47% 0.17% 0.27% 0.32% 0.34% 0.32% 0.37% 0.84% 0.47% 0.84%
RA 0.02% 0.05% 0.04% 0.11% 0.19% 0.07% 0.00% 0.10% 0.11% 0.25%
E Poo HTM WA 1.59% 1.20% 1.87% 1.45% 1.26% 0.55% 1.16% 0.57% 0.68% 0.17%
RA 0.38% 0.52% 0.20% 0.25% 0.17% 0.09% 0.00% 0.01% 0.04% 0.00%
Weal hy HTM WA 2.42% 1.68% 1.71% 1.35% 1.86% 1.77% 2.31% 2.89% 2.63% 2.91%
RA 1.84% 2.32% 1.48% 1.84% 1.53% 1.33% 0.83% 0.89% 0.81% 0.39%
Non HTM WA 1.13% 2.42% 2.45% 2.40% 2.37% 2.11% 2.51% 1.76% 1.31% 1.31%
RA 3.72% 1.88% 3.57% 3.03% 3.51% 3.56% 3.79% 4.33% 4.41% 5.44%
F E ec i e πWA 16.49% 16.12% 16.14% 16.05% 15.87% 15.70% 15.45% 15.30% 15.12% 14.51%
RA 17.52% 17.42% 17.09% 17.06% 16.77% 16.39% 16.29% 16.22% 15.93% 15.56%
No es: WA: Wo king-age (<65 yea s old) indi iduals, RA: Re i emen -age (65+ yea s old) indi iduals.
51
I aly
TABLE A.6: Popula ion Dis ibu ion Ac oss Income Deciles in I aly
Decile 1 2 3 4 5 6 7 8 9 10
A All WA 6.33% 4.11% 5.36% 6.06% 6.50% 6.40% 6.80% 7.23% 7.62% 7.76%
RA 3.68% 5.93% 4.60% 3.94% 3.50% 3.61% 3.20% 2.80% 2.35% 2.23%
B Home-owne WA 2.65% 1.44% 2.72% 3.10% 3.60% 4.29% 4.99% 5.79% 6.58% 7.26%
RA 2.30% 4.08% 3.25% 3.07% 2.98% 2.87% 2.82% 2.61% 2.18% 2.06%
Non owne WA 3.67% 2.67% 2.63% 2.96% 2.90% 2.11% 1.81% 1.44% 1.04% 0.50%
RA 1.38% 1.85% 1.35% 0.87% 0.52% 0.74% 0.38% 0.19% 0.17% 0.17%
C Mo gage WA 0.28% 0.10% 0.68% 0.42% 0.40% 0.51% 1.02% 1.10% 1.56% 2.30%
RA 0.01% 0.04% 0.03% 0.03% 0.06% 0.06% 0.07% 0.11% 0.05% 0.09%
No mo gage WA 2.37% 1.34% 2.04% 2.68% 3.20% 3.78% 3.97% 4.69% 5.03% 4.96%
RA 2.29% 4.05% 3.21% 3.04% 2.92% 2.81% 2.76% 2.50% 2.13% 1.97%
Non owne WA 3.67% 2.67% 2.63% 2.96% 2.90% 2.11% 1.81% 1.44% 1.04% 0.50%
RA 1.38% 1.85% 1.35% 0.87% 0.52% 0.74% 0.38% 0.19% 0.17% 0.17%
D AR mo gage WA 0.06% 0.09% 0.36% 0.17% 0.26% 0.29% 0.51% 0.58% 0.79% 1.29%
RA 0.01% 0.00% 0.01% 0.00% 0.02% 0.00% 0.03% 0.04% 0.01% 0.01%
FR mo gage WA 0.22% 0.01% 0.32% 0.25% 0.14% 0.22% 0.51% 0.52% 0.77% 1.01%
RA 0.00% 0.04% 0.03% 0.03% 0.04% 0.05% 0.04% 0.06% 0.05% 0.08%
E Poo HTM WA 2.74% 1.42% 0.91% 0.76% 0.44% 0.24% 0.42% 0.12% 0.15% 0.06%
RA 0.45% 0.58% 0.43% 0.19% 0.12% 0.19% 0.13% 0.01% 0.12% 0.00%
Weal hy HTM WA 1.62% 0.62% 1.23% 1.13% 0.84% 1.02% 1.41% 1.04% 1.38% 1.52%
RA 1.02% 0.98% 0.52% 0.30% 0.43% 0.22% 0.19% 0.25% 0.25% 0.13%
Non HTM WA 1.97% 2.06% 3.21% 4.17% 5.22% 5.14% 4.97% 6.06% 6.09% 6.16%
RA 2.21% 4.38% 3.66% 3.45% 2.95% 3.20% 2.89% 2.54% 1.98% 2.10%
F E ec i e πWA 20.84% 18.56% 18.03% 17.73% 17.10% 16.53% 16.38% 15.75% 15.33% 14.74%
RA 21.15% 19.90% 19.15% 18.62% 18.28% 17.71% 16.76% 16.68% 16.14% 15.63%
No es: WA: Wo king-age (<65 yea s old) indi iduals, RA: Re i emen -age (65+ yea s old) indi iduals.
52
Po ugal
TABLE A.7: Popula ion Dis ibu ion Ac oss Income Deciles in Po ugal
Decile 1 2 3 4 5 6 7 8 9 10
A All WA 4.80% 4.21% 5.72% 5.49% 7.51% 7.27% 8.02% 8.40% 8.21% 8.17%
RA 5.22% 5.78% 4.33% 4.45% 2.54% 2.74% 1.92% 1.61% 1.80% 1.82%
B Home-owne WA 2.24% 2.40% 3.69% 3.85% 5.32% 5.67% 6.57% 7.56% 7.13% 7.76%
RA 3.78% 4.12% 3.37% 3.66% 2.30% 2.44% 1.79% 1.53% 1.61% 1.71%
Non owne WA 2.57% 1.81% 2.03% 1.65% 2.19% 1.60% 1.46% 0.85% 1.07% 0.41%
RA 1.44% 1.66% 0.96% 0.79% 0.24% 0.30% 0.13% 0.08% 0.19% 0.11%
C Mo gage WA 0.80% 0.89% 2.00% 1.96% 3.15% 3.63% 3.99% 5.31% 4.88% 5.50%
RA 0.15% 0.16% 0.16% 0.17% 0.08% 0.17% 0.17% 0.30% 0.30% 0.33%
No mo gage WA 1.44% 1.50% 1.69% 1.89% 2.17% 2.03% 2.58% 2.25% 2.25% 2.26%
RA 3.63% 3.96% 3.21% 3.48% 2.23% 2.28% 1.62% 1.23% 1.31% 1.38%
Non owne WA 2.57% 1.81% 2.03% 1.65% 2.19% 1.60% 1.46% 0.85% 1.07% 0.41%
RA 1.44% 1.66% 0.96% 0.79% 0.24% 0.30% 0.13% 0.08% 0.19% 0.11%
D AR mo gage WA 0.76% 0.84% 1.81% 1.70% 2.54% 3.20% 3.16% 4.76% 4.37% 4.47%
RA 0.13% 0.11% 0.10% 0.15% 0.05% 0.06% 0.12% 0.23% 0.15% 0.20%
FR mo gage WA 0.04% 0.05% 0.19% 0.26% 0.62% 0.44% 0.83% 0.55% 0.51% 1.03%
RA 0.03% 0.05% 0.06% 0.02% 0.03% 0.11% 0.04% 0.06% 0.15% 0.13%
E Poo HTM WA 1.50% 0.87% 0.88% 0.63% 0.84% 0.49% 0.29% 0.22% 0.33% 0.02%
RA 0.63% 0.69% 0.42% 0.17% 0.02% 0.07% 0.04% 0.02% 0.00% 0.00%
Weal hy HTM WA 1.00% 1.33% 2.25% 1.68% 3.15% 3.35% 3.28% 3.91% 3.15% 2.72%
RA 0.85% 0.92% 0.48% 0.40% 0.22% 0.60% 0.23% 0.14% 0.26% 0.15%
Non HTM WA 2.30% 2.01% 2.59% 3.19% 3.51% 3.43% 4.45% 4.27% 4.73% 5.42%
RA 3.75% 4.17% 3.44% 3.88% 2.30% 2.08% 1.65% 1.44% 1.54% 1.67%
F E ec i e πWA 14.72% 14.73% 14.55% 14.55% 14.43% 14.21% 14.13% 13.99% 13.86% 13.66%
RA 14.84% 15.19% 14.88% 15.04% 14.48% 14.59% 14.34% 14.27% 14.37% 13.82%
No es: WA: Wo king-age (<65 yea s old) indi iduals, RA: Re i emen -age (65+ yea s old) indi iduals.
53
Spain
TABLE A.8: Popula ion Dis ibu ion Ac oss Income Deciles in Spain
Decile 1 2 3 4 5 6 7 8 9 10
A All WA 7.77% 3.89% 6.15% 6.15% 7.31% 6.82% 7.72% 7.75% 7.91% 8.27%
RA 2.27% 6.07% 3.96% 3.90% 2.53% 3.18% 2.29% 2.36% 1.98% 1.72%
B Home-owne WA 3.46% 2.75% 3.95% 4.46% 5.31% 5.77% 6.57% 6.97% 7.44% 7.59%
RA 1.61% 4.92% 3.41% 3.35% 2.37% 2.95% 2.18% 2.28% 1.92% 1.71%
Non owne WA 4.25% 1.15% 2.21% 1.69% 2.01% 1.06% 1.16% 0.79% 0.48% 0.69%
RA 0.60% 1.16% 0.56% 0.56% 0.17% 0.23% 0.11% 0.08% 0.06% 0.01%
C Mo gage WA 1.16% 1.16% 1.63% 2.42% 3.41% 3.30% 3.96% 4.43% 5.47% 4.77%
RA 0.08% 0.21% 0.21% 0.25% 0.19% 0.23% 0.28% 0.22% 0.52% 0.43%
No mo gage WA 2.30% 1.59% 2.32% 2.04% 1.91% 2.47% 2.61% 2.54% 1.97% 2.82%
RA 1.52% 4.71% 3.20% 3.10% 2.17% 2.72% 1.90% 2.06% 1.40% 1.28%
Non owne WA 4.25% 1.15% 2.21% 1.69% 2.01% 1.06% 1.16% 0.79% 0.48% 0.69%
RA 0.60% 1.16% 0.56% 0.56% 0.17% 0.23% 0.11% 0.08% 0.06% 0.01%
D AR mo gage WA 0.88% 0.80% 1.18% 1.94% 2.44% 2.59% 2.79% 3.26% 4.01% 3.03%
RA 0.01% 0.08% 0.08% 0.09% 0.14% 0.06% 0.15% 0.10% 0.18% 0.06%
FR mo gage WA 0.28% 0.35% 0.45% 0.48% 0.97% 0.70% 1.17% 1.17% 1.46% 1.74%
RA 0.07% 0.12% 0.14% 0.16% 0.06% 0.17% 0.13% 0.12% 0.34% 0.37%
E Poo HTM WA 2.22% 0.57% 0.94% 0.79% 0.70% 0.39% 0.33% 0.11% 0.02% 0.02%
RA 0.30% 0.37% 0.18% 0.13% 0.07% 0.06% 0.01% 0.04% 0.02% 0.01%
Weal hy HTM WA 1.76% 1.45% 1.65% 2.33% 3.11% 2.88% 3.61% 3.32% 3.49% 2.81%
RA 0.35% 0.84% 0.58% 0.50% 0.27% 0.46% 0.27% 0.20% 0.26% 0.18%
Non HTM WA 3.72% 1.88% 3.57% 3.03% 3.51% 3.56% 3.79% 4.33% 4.41% 5.44%
RA 1.56% 4.87% 3.21% 3.28% 2.20% 2.67% 2.02% 2.12% 1.70% 1.53%
F E ec i e πWA 13.59% 13.23% 12.87% 12.94% 12.75% 12.61% 12.73% 12.58% 12.52% 12.27%
RA 14.09% 13.88% 13.51% 13.72% 13.48% 13.45% 13.28% 13.05% 12.95% 12.70%
No es: WA: Wo king-age (<65 yea s old) indi iduals, RA: Re i emen -age (65+ yea s old) indi iduals.
54
FIGURE A.6: Decomposi ion o he Unhedged In e es Ra e Exposu e (URE)
(A) Eu ozone
-50
0
50
100
150
12345678910 12345678910
Cu en pe iod income minus consump ion
Ne ma u ing asse posi ion
Ma u ing mo gage- ela ed liabili ies
To al URE
Wo king Age Pension Age
in % o disposable income
To al
(B) F ance
-150
-100
-50
0
50
100
150
12345678910 12345678910
Wo king Age Pension Age
in % o disposable income
FR
(C) Ge many
-150
-100
-50
0
50
100
150
12345678910 12345678910
Wo king Age Pension Age
in % o disposable income
DE
(D) G eece
-150
-100
-50
0
50
100
150
12345678910 12345678910
Wo king Age Pension Age
in % o disposable income
EL
(E) I aly
-150
-100
-50
0
50
100
150
12345678910 12345678910
Wo king Age Pension Age
in % o disposable income
IT
(F) Po ugal
-150
-100
-50
0
50
100
150
12345678910 12345678910
Wo king Age Pension Age
in % o disposable income
PT
(G) Spain
-150
-100
-50
0
50
100
150
12345678910 12345678910
Wo king Age Pension Age
in % o disposable income
ES
No es: The igu e shows o each income decile and sepa a ely o he wo king and e i emen -age he decompo-
si ion o he URE. Panel (A.6A) shows he weigh ed a e age ac oss he six selec ed coun ies. The “Ne ma u ing
asse posi ion” is de ined as he ne di e ence be ween he sum o all asse s and non-mo gage- ela ed liabili ies.
“Ma u ing mo gage- ela ed liabili ies” de ines he subse o mo gage- ela ed liabili ies. See Table (A.2) o he
exac HFCS a iables and hei de ini ions.
61

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