Introduction
Using a combination of both macro and micro information of approximately 5000 household from the Irish household finance and consumption a balance sheet of 2013 was constructed back to 2006. The HFCS-SIM closely matched the actual balance sheet data from different external surveys such as the money and banking statistics and Central Bank Loan Level Databases statistics. The data gathered provided information on how different Irish households were affected by the shock into their assets and incomes (Horace, 2011). The lecture indicates that the wealth to income ration was the largest among older people aged 65 years and above because they tend to have greater concentration of their wealth in terms of property and have less disposable income on aggregate. According to the finding of this research, the decline of the aggregate debt was an indication that the household were deleveraging their assets and incomes. In contrast to this, between 2006 and 2010, young household age between 18 and 44 years saw their debt to income ratios increased by approximately 75%, as a result of rising debt levels and declining disposable income. The work will present the main strengths of the research, weaknesses and conclusion
Main strengths of the research
The research pointed out the causes of the financial crisis and the reasons as to why the households in Irish were left with the burden of debt repayment. According to the research the Irish people and more specifically the old age were left with the burden of mortgage repayment because of the easily acquired loans and the household rush for the ever increasing home prices (Michael, 2014). The necessary financial information in regard to the survey of the HFCS was used to gather and analyze the necessary intensive exercise. The research enables use roll forward and backward using the Irish HFCS and understands how the household have changed with time. In order to express how the household spending behavior might affect their debt repayment, the research cross-checked the simulated distributed between the old and the young. The finding of the research indicates that in order to understand the trend of mortgage payment among different households in Irish it would be important to understand the household disposable incomes.
Over the years, tax policy has been used by many researchers to understand the economic impact. Nevertheless, this research is extra- ordinary because it has used the micro simulation techniques of the household wealth to understand house it have impact on the macro-economic phenomenon. According to the finding of the research, understanding of the households holding of assets and debts usually affects the economic policies. Based on the Irish findings, the failure of the households to repay their debts can have a major impact on the general economy of a country (Horace, 2011). According to the research, it is true that lowering the rate of interest for the loan borrowed would eventually reduce the burden for the households. It is true that the mortgage debt usually account for the huge of debt for the older people that the youths. In addition, the old people are the major holder of the residential and business property and both of these invest account for most of their debt share.
Just like other financial rules, the research categorized the assets into three broad categorizes such as the financial, real and property and the way in which they influence the household decisions on investment and debt payment. The financial assets included in the finding of the impact of the household consumption to the economic impact of debt payment of the households include: the equities, bold holding, savings and deposits. In order to understand the net wealth of the household it is important for the financial analyst to understand the debt level of the households (Michael, 2014). In order to understand the household mortgage debt it is important for the financial analyst to understand the households outstanding debt, pay back period, the current interest rate level, the form of interest rate, and the term remaining for loan repayment. These factors would be of great importance in understanding the loan conditions in a given economy, modifications and negotiations. As a matter of fact, having an accurate measure of the household income is significant factor in understanding the debt to income ratio in over a shift of time as a factor that cause macro-economic shocks.
Weakness of the research
Despite the fact that the Quarterly Financial Account from the Central Bank in Irish provide appropriate aggregate trend of the household it never provided the heterogeneity of the household behavior in the recovery phase and during the crisis. The research failed to put to light why some households especially the young generation failed to repay their mortgage, the households who changed their spending behavior and the outlook of the household spending (Amos, 2010). The use of households’ consumption behavior was only significant in certain applications such as the problems of mortgage repayments. The comparison of the household finance and consumption survey from European and United States financial account might not reveal an actual picture of how micro factors might affect the macro economic factors of any given economy. The research used a large population to conduct the research, the research used about 5, 419 households which was a large population for the data to be collected. The research used a variety of information such as debts, assets, inheritances, consumption, non-labor income employment characteristics, pension information and work history to illustrate how they affects the macro economic factors in the Irish economy. The use of all these factors would be difficult as the researcher would fact difficulties of establishing which factors contributed to the greatest impact to the macro-economic factors.
Despite the fact that the research had suggested the use of the gross, debt, assets and incomes of the Irish households in finding their impact on the backward and forward financial economic crisis in Irish it later failed to follow the assumption in establishment of the stress testing of the households. In addition although the research ended up with a positive result indicating how household factors such as income, pension, employment level and asset ownership determines their level of debt payment, it never put into consideration that different households have different ownership levels (Francis, 2013). The research was based on the Irish economy whose households are more likely to own a home, have few assets to repay back the loans are more heavily indebted and have very similar wealth and income. Therefore, basing the finding on the Irish economy could not give the actual picture of how households’ incomes and assets might impact the general economy.
Conclusion
The findings of the research were evident that households’ factors such as income and assets might have great impact on the behavior of the household loan repayment. As for the case of the United States where most households failed to pay for their mortgage hence the cause of the financial crisis, the Irish case is not extra ordinary as the households especially those above 65 years old failed to pay their mortgages based on their incomes and assets (Horace, 2011). The research was based on a large population for the research and could not reveal the actual information and impacts of the households. The research aimed at showing the backward and forward impact of the household behavior a factor that was complex for the research to reveal.
References
Horace, M. (2011). Holistic Project and Supply Chain Management. American business review. Oxford university press.
Francis, G. (2013). Rethinking of foreign policies: economic polices and management. Cambridge University Press.
Amos, B. (2010).Accounting heterogeneity of Irish Households: Business review report. New York publishers.
