This paper uses representative individual household data from Luxembourg to evaluate how severe economic conditions could affect bank exposure to the household sector. Information on household income, expenses and liquid assets are used to calculate household-specific probabilities of default...

We study how and to what extent private households are affected by the recent financial crisis and how their financial decisions are inuenced by this shock. Our analysis reveals that individuals with low levels of financial literacy are less likely to have invested in the stock market and thus...