The simulations take into account changes over time in individual debt levels, as well as changes in household wealth from savings and fluctuations in the value of financial assets. Tracking the asset side of household balance sheets gives us a more accurate picture of systemic risk since changes in wealth affect households’ ability to pay their debt.
Household vulnerabilities depend not only on the average level of debt, but also on how debt is distributed across individuals. One strength of the model is precisely its ability to account for this distribution.