Review of Financial Vulnerability Studies

Lee, May Poh; Sabri, Mohamad Fazli

doi:10.14738/abr.52.2784

Cited by 19 publications

(12 citation statements)

References 10 publications

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“…Poh Lee and Fadzli Sabri Lee(2017) have established the core definition of financial fragility as the personal feeling of being in a financially unstable situation; this feeling is one of the early indicators of financial stress for households. For this reason, they advise that households must always be concerned with an alert to their financial status and immediately take some corrective action when deficits occur.…”

Section: Literature Reviewmentioning

confidence: 99%

Financial fragility and financial stress during the COVID-19 crisis: evidence from Colombian households

Cardona-Montoya

Cruz

Mongrut

2022

JEFAS

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PurposeOur findings indicate that workers with more financial education were more prepared to face the negative effects on their finances from COVID. This ability reduces the probability of becoming financially fragile and experiencing financial stress.Design/methodology/approachThe authors applied a survey questionnaire to 856 Colombian adults and used principal component analysis to build an index for each factor. Then, the authors used a linear regression model with the indexes to test our hypotheses and verify our results using a structural equation model.FindingsOur findings indicate that workers who have more financial education are more prepared to face the negative effects on their finances, which reduces the probability of becoming financially fragile and having financial stress.Research limitations/implicationsThe authors found that there is no significant relationship between financial literacy and financial fragility, neither between financial literacy and financial stress, so a better financial education will not lower financial fragility and stress unless it is being applied by households through better financial preparedness.Practical implicationsIt is important to highlight that the pandemic not only taught us to improve biosecurity measures but also that financial strength, ability to work remotely and income diversification were key factors in facing this adverse shock, the authors show that high levels of financial education have a positively relationship with the ability of individuals to manage their resources, so private and public institutions have to promote better financial education.Originality/valueThis is the first study that applies the four different indexes to an emerging country (i.e. Colombia), and the first one to create and use a financial stress index.

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Section: Literature Reviewmentioning

confidence: 99%

Financial fragility and financial stress during the COVID-19 crisis: evidence from Colombian households

Cardona-Montoya

Cruz

Mongrut

2022

JEFAS

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“…A focus on subjective financial situation, as opposed to just focussing on income and employment prospects, also takes into account an individual's capacity to participate in wider social and cultural activities as these may incur costs [22]. Moreover, anxieties that individuals feel when contemplating their financial futures may also play a fundamental role in influencing their wellbeing and quality of life, as individuals might be affected by the prospect of loss and the fear of experiencing financial hardship, regardless of their current stated economic circumstances.…”

Section: Introductionmentioning

confidence: 99%

Health, subjective financial situation and well-being: a longitudinal observational study

Downward

Rasciute

Kumar

2020

Health Qual Life Outcomes

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Background: An individual's financial situation is a key contributor to their overall well-being. Existing research has examined the direct economic consequences of changes in health upon out-of-pocket healthcare expenditure, participation in the labour force and potential earnings. There is also research exploring an individual's concern about their subjective financial situation regardless of the level of their income or work status on their health. In contrast, this paper conducts a causal analysis of the effects of general and mental health on an individual's subjective evaluation of their financial situation controlling for their work status and income. This is of importance because current health policy in the United Kingdom (UK) stresses the role of health as an asset which can mediate the wider flourishing of individuals. Moreover, subjective financial situation comprises a key component of wellbeing now being measured and sought in social welfare policy. Methods: Fixed effects instrumental variable panel data regression analysis is applied to 25 years of longitudinal data, from 1991, drawn from the harmonised British Household Panel Survey (BHPS) and Understanding Society Survey (USS). Results: Improved general health and reduced mental illness both improve the subjective financial situation of males and females. However, these affects diminish across older cohorts of males and females. Conclusions: Investing in and improving general and mental health can improve the subjective financial situation and hence well-being of individuals. The targeting of health also needs to take account of an individuals' life-stage.

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“…Overborrowing may lead to debt level being too high relative to the capacity of repayment [17]. When focusing on the default risk of households, household financial vulnerability is defined as the failure of a household to repay its debt [18,19]. The definition proposed by [17] takes into account not only over-commitment because of excess indebtedness, but also the inability to meet monthly expenses for food items, to balance the budgets, and to pay the rent and utility bills.…”

Section: Literature Reviewmentioning

confidence: 99%

Household Financial Vulnerability to Income and Medical Expenditure Shocks: Measurement and Determinants

Zhou

2022

IJERPH

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This paper proposes a novel ex ante indicator to measure the degree of household financial vulnerability by calculating the probability of falling into financial distress under uncertain income and medical expenditure. The advantage of this measure is that it can reflect the capacity of households to deal with income shock and medical expenditure shock and quantify the degree of financial vulnerability for households beforehand. We employ it to measure the financial vulnerability of Chinese urban and rural households separately by using data from the China Health and Retirement Longitudinal Study (CHARLS) 2011, 2013, and 2015. Further, we analyze the potential determinants and their contributions to financial vulnerability changes. We find that rural households experience higher financial vulnerability than urban households. Furthermore, the investigation into the effects of potential determinants suggests that demographic variables (including age, gender, education, marital status, household size, labor force, and area), health-related variables (including health status, disability, and health shock), and medical insurance variables (including urban employee medical insurance and commercial medical insurance) have significant effects on the financial vulnerability of both urban and rural households. Contribution analysis of the determinants of household financial vulnerability shows that variables including disability, health shock, household size, labor force, and education contribute most to the changes in financial vulnerability.

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Review of Financial Vulnerability Studies

Cited by 19 publications

References 10 publications

Financial fragility and financial stress during the COVID-19 crisis: evidence from Colombian households

Financial fragility and financial stress during the COVID-19 crisis: evidence from Colombian households

Health, subjective financial situation and well-being: a longitudinal observational study

Household Financial Vulnerability to Income and Medical Expenditure Shocks: Measurement and Determinants

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