Targets, Interest Rates, and Household Saving in Urban China
IMF Working Papers, October 1, 2011
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Bibliographic details
- Authors: Malhar S Nabar
- Published: October 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463904258.001
Overview
- Study period: 1996-2009.
- Sample: panel of China's provinces.
- Observed change: urban household saving rates increased from 19 percent of disposable income to 30 percent of disposable income.
- Paper length: 29 pages.
- Series: Working Paper No. 2011/223.
- DOI: https://doi.org/10.5089/9781463904258.001
Main findings
- The increase in urban saving rates is negatively associated with the decline in real interest rates over 1996-2009.
- The negative association implies households exhibit target saving behavior:
- When the return to saving declines, it becomes more difficult to meet a target and households increase saving out of current disposable income to compensate.
- When the return to saving increases, it becomes easier to meet a target and households lower their saving out of current disposable income.
- Results are robust across specifications and to the inclusion of additional variables.
Empirical evidence and robustness
- Panel analysis across provinces over 1996-2009 links real interest rate movements to urban household saving rate changes.
- Robustness: findings hold across alternative model specifications and after adding additional control variables.
Policy implications
- A main policy implication is that an increase in real deposit rates may help lower household saving and boost domestic consumption.
Source: "Targets, Interest Rates, and Household Saving in Urban China", Malhar S Nabar, IMF Working Papers 2011, 223 (2011), accessed 6/30/2026, DOI: https://doi.org/10.5089/9781463904258.001