Modelling the demand for financial assets: The case of Sri Lanka

E.A. Selvanathan, Maneka Jayasinghe, Saroja Selvanathan and Brinda Viswanathan

Emerging Markets Review, 2025, vol. 68, issue C

Abstract: This paper uses a portfolio allocation model to analyse the demand for household financial assets in the form of bank deposits, savings and term deposits for an emerging market, Sri Lanka, for the period 1981–2022. In contrast to previous research, findings reveal the presence of a non-linear relationship between household financial assets and share of asset allocation. The findings also suggest some degree of substitutability and complementarity between household bank investments. The findings of this study inform monetary policy decisions to encourage household savings in times of highly volatile political and economic conditions, such as civil wars and economic crises.

Keywords: Portfolio allocation model; Elasticity; Substitutability; Quadratic AIDS (search for similar items in EconPapers)
JEL-codes: D12 G51 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:68:y:2025:i:c:s1566014125000792

DOI: 10.1016/j.ememar.2025.101330

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