Motivated by the recent rise in interest rates and high inflation in the euro area, we test households’ resilience against these shocks by performing microsimulations to investigate the impact of these shocks on household vulnerability and on debt at risk. We identify financially vulnerable households in Austria using several vulnerability measures common in the literature and household-level data from the latest wave of the Household Finance and Consumption Survey (HFCS). We find that the inflation shock has a stronger impact on the share of vulnerable households than the interest rate shock. However, the interest rate shock has a stronger impact on debt at risk than the inflation shock: the debt of households becoming vulnerable after the former (typically mortgage debt) tends to be larger than the debt held by households becoming vulnerable after the inflation shock (typically nonmortgage debt). Compared to the euro area, the departing levels of household vulnerability and debt at risk are much lower in Austria. The impact of a combined scenario is similar in both regions.
