Household Savings and Negative Interest Rates
International Advances in Economic Research
; 29(1-2):1-13, 2023.
Article
in English
| ProQuest Central | ID: covidwho-2319524
ABSTRACT
This paper analyses determinants of household savings in a model based on an extension of the disequilibrium savings theory. These extensions follow from the life-cycle, permanent-income and Ricardian-equivalence theories. Based on panel data of 20 countries from the period 2000–2020, fixed-effect least squares estimation procedures are used. The analysis provides evidence that negative interest rates lead to a statistically and economic significant increase in savings. This implies that stimulating household consumption with a monetary policy of negative interest rates is counter-productive. The positive effect of income uncertainty and lagged saving rates gets smaller for negative interest rates, weakening the support for the disequilibrium-savings theory. Larger government deficits increase savings even more when rates are negative, strengthening the Ricardian equivalence effect. The effect of negative interest on the predictions of the life-cycle and permanent-income theories is mixed.
Business And Economics--International Commerce; Household savings rate; Savings' determinants; Negative interest rates; Panel data; F31; F32; F36; Standard of living; Health care expenditures; Monetary policy; Inflation; Investments; Interest rates; Coronaviruses; Households; Real income; COVID-19; Consumption
Full text:
Available
Collection:
Databases of international organizations
Database:
ProQuest Central
Language:
English
Journal:
International Advances in Economic Research
Year:
2023
Document Type:
Article
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