The Effect of Interest Rate on Household Consumption: Evidence from a Natural Experiment in India

M. Kapoor, S. Ravi
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引用次数: 14

Abstract

This paper estimates the change in consumption caused by a higher real interest rate. We exploit the change in Indian banking legislation which encourages all banks to offer a higher interest rate on deposits to citizens above sixty years. We use detailed monthly consumption data from the Indian National Sample Survey to calculate regression discontinuity estimates, based on age cut-offs. We find that an increase of 50 basis points in the interest rate on deposits leads to an immediate decline of consumption expenditure by 12 percent. A study of disaggregated monthly consumption expenditure reveals that the decline is primarily in non-food, non-essential items. We calculate similar estimates for data prior to the banking legislation and find no significant difference in the monthly consumption expenditure. These results are useful in understanding the permanent income hypothesis within the context of an ageing world population.
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利率对家庭消费的影响:来自印度自然实验的证据
本文估计了较高的实际利率引起的消费变化。我们利用印度银行立法的变化,鼓励所有银行为60岁以上的公民提供更高的存款利率。我们使用来自印度国家抽样调查的详细月度消费数据来计算基于年龄截断的回归不连续估计。我们发现存款利率每提高50个基点,消费支出就会立即下降12%。一项对月度消费支出的分类研究显示,下降主要发生在非食品和非必需品方面。我们对银行立法之前的数据进行了类似的估计,发现每月消费支出没有显著差异。这些结果有助于理解世界人口老龄化背景下的永久收入假说。
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