A Spread-Based Measure of Household Financial Stress
Published: November 13, 2024
The ability of household balance sheets to withstand adverse shocks has implications for economic and financial stability. Recent shocks, such as the COVID-19 pandemic and associated inflationary pressures, tested the household sector’s resilience and highlighted the need for sharper stress indicators. This brief presents a new spread-based measure, called the Household Financial Stress Measure (HFSM), to monitor household financial stress. The HFSM explains more variation in proxies for stress than other commonly used measures. It also distinguishes stress from financial versus non-financial factors (Brief no. 24-06).