Household financial behaviour and systemic blind spots: a multidimensional framework for early warning indicators
| dc.contributor.author | Ryan, Marie | en |
| dc.contributor.author | Xiong, Huanhuan | en |
| dc.contributor.author | Carton, Fergal | en |
| dc.contributor.author | McCarthy, J. B. | en |
| dc.date.accessioned | 2025-05-14T15:05:50Z | |
| dc.date.available | 2025-05-14T15:05:50Z | |
| dc.date.issued | 2025-04-30 | en |
| dc.description.abstract | This paper develops a behavioural framework to analyse how household financial vulnerabilities transform into systemic risks. Using structural equation modelling on Ireland's 2020 Survey on Income and Living Conditions, we identify five behavioural dimensions as early warning indicators for financial stability: Financial Behaviours, Financial Satisfaction, Financial Difficulty, Minimum Income, and Financial Technology. Our decomposition analysis reveals financial vulnerability distribution consists of 37.2% between demographic groups and 62.8% within groups, creating distinct transmission channels for financial instability. Young adults display present-focused decision patterns that amplify economic shocks, while financial technology disparities introduce fragmentation risk as population segments interact with the financial system through opposing channels. Education attainment serves as a behavioural buffer against financial vulnerability, while the "squeezed middle" creates potential systemic vulnerability clusters. Financial stability authorities can implement our framework by integrating behavioural indicators into monitoring dashboards, establishing vulnerability thresholds for demographic segments, and developing graduated policy responses. The framework offers practical guidance for integrating technology-enabled monitoring with traditional macroprudential tools, balancing implementation costs with blind spot detection across diverse statistical capabilities and regulatory contexts. These empirically validated indicators complement traditional macroprudential tools, by identifying stability blind spots, and thus financial stability monitoring across diverse economic conditions. | en |
| dc.description.status | Peer reviewed | en |
| dc.description.version | Draft | en |
| dc.format.mimetype | application/pdf | en |
| dc.identifier.citation | Ryan, M., Xiong, H., Carton, F. and McCarthy, J. B. (2025) 'Household financial behaviour and systemic blind spots: a multidimensional framework for early warning indicators'. Available at SSRN: https://ssrn.com/abstract=5236480 | en |
| dc.identifier.doi | 10.2139/ssrn.5236480 | en |
| dc.identifier.issn | 1556-5068 | en |
| dc.identifier.uri | https://hdl.handle.net/10468/17493 | |
| dc.language.iso | en | en |
| dc.publisher | Elsevier Ltd. | en |
| dc.rights | © 2025, the Authors. | en |
| dc.subject | Financial stability and systemic risk | en |
| dc.subject | Behavioural economics | en |
| dc.subject | Structural equation modelling | en |
| dc.subject | Financial technology | en |
| dc.subject | Macroprudential policy | en |
| dc.title | Household financial behaviour and systemic blind spots: a multidimensional framework for early warning indicators | en |
| dc.type | Article (non peer-reviewed) | en |
| dc.type | posted-content | en |
