The effect of interest-rate changes on household saving and consumption: a survey

Douglas Elmendorf

No 96-27, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Direct estimates of the interest elasticity of saving suffer from several serious problems. As an alternative, this survey uses an indirect approach that combines models of individual behavior with estimates of certain features of individuals' preferences. The paper examines the effect of interest-rate changes on the consumption and saving of people who follow the lifecycle model, who plan to leave bequests, who save to reach a fixed target, and who have short planning horizons. The models that likely describe the behavior of the people who account for most of aggregate saving imply positive interest elasticities of saving.

Keywords: Consumption (Economics); Consumer behavior; Interest rates (search for similar items in EconPapers)
Date: 1996
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/1996/199627/199627abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/1996/199627/199627pap.pdf (application/pdf)

Related works:
Working Paper: The Effect of Interest-Rate Changes on Household Saving and Consumption: A Survey (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:96-27

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().