Targets, Interest Rates, and Household Saving in Urban China

 
Author/Editor: Nabar, Malhar
 
Publication Date: October 01, 2011
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper studies a panel of China's provinces over the period 1996-2009 during which urban household saving rates increased from 19 percent of disposable income to 30 percent. It finds that the increase in urban saving rates is negatively associated with the decline in real interest rates over this period. This negative association suggests that Chinese households save with a target level of saving in mind. When the return to saving declines (increases), it becomes more difficult (easier) to meet a target and households increase (lower) their saving out of current disposable income to compensate. The results are robust across specifications and to the inclusion of additional variables. A main policy implication is that an increase in real deposit rates may help lower household saving and boost domestic consumption.
 
Series: Working Paper No. 11/223
Subject(s): Bank reforms | Banks | Interest rates | Private consumption | Private investment | Private savings

Author's Keyword(s): China | Household Saving | Target Savings | Financial Liberalization.
 
English
Publication Date: October 01, 2011
ISBN/ISSN: 9781463904258 Format: Paper
Stock No: WPIEA2011223
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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