 Interest rate liberalization and household investment in ChinaJiajun Lan, Zhiyu Peng, Yinghao Pan and Yihan Liu International Review of Economics & Finance, 2024, vol. 96, issue PA Abstract: In this study, we investigate the impact of interest rate liberalization on household investment behavior in China using data from the China Household Finance Survey from 2011 to 2019. We find that financial liberalization significantly increases the likelihood of households participating in financial markets and raises their holdings of riskier assets, driven by the wealth effect. This effect is more pronounced among higher-income, higher-asset, and better-educated households, without housing mortgages, as well as urban households. Our results highlight the importance of financial liberalization policies and provide new perspectives on the “limited participation puzzle” documented in emerging economies, where relatively few households actively invest in financial assets despite high expected returns. This study underscores how interest rate deregulation incentivizes household portfolio reallocation and promotes financial inclusion across socioeconomic groups. Keywords: Interest rate liberalization; Financial market participation; Wealth effect (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:96:y:2024:i:pa:s1059056024006233 DOI: 10.1016/j.iref.2024.103631 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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