title: Modelling household finances: A Bayesian approach to a multivariate two-part model.
abstract: We contribute to the empirical literature on household finances by introducing a Bayesian multivariate two-part model, which has been developed to further our understanding of household finances. Our flexible approach allows for the potential interdependence between the holding of assets and liabilities at the household level and also encompasses a two-part process to allow for differences in the influences on asset or liability holding and on the respective amounts held. Furthermore, the framework is dynamic in order to allow for persistence in household finances over time. Our findings endorse the joint modelling approach and provide evidence supporting the importance of dynamics. In addition, we find that certain independent variables exert different influences on the binary and continuous parts of the model thereby highlighting the flexibility of our framework and revealing a detailed picture of the nature of household finances.
authors.affiliation: Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK.
authors.forename: Sarah
authors.initials: S
authors.lastname: Brown
authors.affiliation: Department of Quantitative Methods and Information Systems, Indian Institute of Management, Bangalore, India.
authors.forename: Pulak
authors.initials: P
authors.lastname: Ghosh
authors.affiliation: MRC Biostatistics Unit, Cambridge Institute of Public Health, Cambridge Biomedical Campus, Robinson Way, Cambridge, CB2 0SR, UK.
authors.forename: Li
authors.initials: L
authors.lastname: Su
authors.affiliation: Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK.
authors.forename: Karl
authors.initials: K
authors.lastname: Taylor
keywords: Assets; Bayesian approach; Bridge distribution; Debt; Two-part model