Report

Identifying "Tipping Points" in Consumer Liabilities Using High-Frequency Data

Abstract: The concept of a "tipping point" captures the idea of a threshold where debt is no longer sustainable and becomes a drag on household financial well-being. In the most severe cases, a "tipping point" represents the point at which a household experiences a debt default. This paper constructs different measures based on the dynamics of the monthly debt payment to after-tax income ratio. The preliminary examination using data from the Credit Risk Insight Servicing McDash (CRISM) dataset suggests that some of these measures have some predictive content when compared to alternative risk measures such as a FICO score.

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Community Development Publications and Reports

Publication Date: 2016-10-19

Pages: 26 pages

Note: The St. Louis Fed Center for Household Financial Stability and the Private Debt Project hosted three "Tipping Points" Household Debt Research Symposia, 2016-2018. All three sessions were centered on the question of "tipping points" in regard to debt: How and when does household debt move from being wealth-building and productive for households and the economy to being wealth-depleting and destructive for both?

Note: Conference Materials: https://fraser.stlouisfed.org/title/tipping-points-i-mapping-understanding-impact-debt-household-financial-well-9372/session-list-685741

Note: Conference Executive Summary: https://fraser.stlouisfed.org/title/tipping-points-i-mapping-understanding-impact-debt-household-financial-well-9372/executive-summary-685740

Note: Tipping Points Conference Series: https://fraser.stlouisfed.org/series/tipping-points-conference-series-9375