What leads people to tolerate negative interest rates on their savings?

O. Corneille, D’Hondt, Catherine, Rudy De Winne, E. Efendic and Aleksandar Todorovic
Additional contact information
O. Corneille: Université catholique de Louvain
D’Hondt, Catherine: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2021011, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: Using an online experiment, we investigate intertemporal preferences to infer people’s willingness to accept negative interest rates (NIRs) on their savings. We find some tolerance of NIRs, i.e., of people being willing to hold money in the bank rather than spend it, thereby accepting less savings at some future time. This tolerance strongly depends on the amount of savings, time horizon, actual savings behavior, and anchoring. Specifically, the higher the amount, the lower is the tolerance of NIRs, consistent with a reverse magnitude effect. Moreover, as the time horizon increases, the tolerance of NIRs decreases. Regular savers are more likely to tolerate NIRs than nonregular savers, which is consistent with status quo bias, higher familiarity with savings deposits, or a futureoriented mindset. We also find a higher tolerance of NIRs on savings when participants are anchored towards NIRs, i.e., when participants are first presented with NIRs and then with positive interest rates (PIRs).

Keywords: Negative interest rates; Savings accounts (search for similar items in EconPapers)
JEL-codes: G11 G21 G40 G41 G51 G53 (search for similar items in EconPapers)
Pages: 14
Date: 2021-05-01
Note: In: Journal of Behavioral and Experimental Economics, 2021, vol. 93, 101714
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: What leads people to tolerate negative interest rates on their savings? (2021)
Working Paper: What leads people to tolerate negative interest rates on their savings? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2021011

DOI: 10.1016/j.socec.2021.101714

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