Financing energy efficiency retrofits in Chilean households: The role of financial instruments,savings and uncertainty in energy transition

High firewood consumption for heating produces high levels of pollution in cities in central and southern Chile, with serious consequences for health and quality of life. Energy efficiency measures (EEMs) have been identified as the best strategy to reduce air pollution and maximize social benefits. However, their adoption has been slow. The objective of this article is to investigate household preferences for financial incentives needed to promote private investments in EEMs in Central-Southern Chilean households and study the role of energy savings and the uncertainty about potential savings in the investment decision, with the aim of finding solutions to increase the adoption of these technologies. We use a choice experiment to explore the trade-off between the investment costs, financial instruments, energy savings, and the uncertainty about achieving the theoretical savings provided by engineering and architectural models. The results show that financial instruments play the most important role in this decision, followed by the savings achieved by the retrofit. Householders prefer to finance their investments with a mix of their personal resources and medium-term credits, trying to avoid long-term commitments. Although uncertainty was found to be a significant variable, it seems to play a small role in the investment decision.     

转型期中国城乡居民宏观消费与储蓄的实证检验

在经济转型的历史进程中,中国居民消费的宏观制度环境和微观选择行为发生了较为重大的变迁。文章在制度转型的宏观背景下,基于居民消费行为的分析框架,分别建立了城镇与农村居民宏观消费与储蓄模型,并对中国城乡居民消费与收入的长期均衡和短期波动关系进行了实证检验。在此基础上,提出了相应的政策建议。     

Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks

Although credit risk is an important factor that financial institutions must cope with, the determinants of bank problem loans have been little studied. Using panel data, we compare the determinants of problem loans of Spanish commercial and savings banks in the period 1985–1997, taking into account both macroeconomic and individual bank level variables. The GDP growth rate, firms, and family indebtedness, rapid past credit or branch expansion, inefficiency, portfolio composition, size, net interest margin, capital ratio, and market power are variables that explain credit risk. However, there are significant differences between commercial and savings banks, which confirm the relevance of the institutional form in the management of credit risk. Our findings raise important bank supervisory policy issues: the use of bank level variables as early warning indicators, the advantages of bank mergers from different regions, and the role of banking competition and ownership in determining credit risk.     

The consumption–investment decision of a prospect theory household: A two-period model

This study extends the literature on portfolio choice under prospect theory preferences by introducing a two-period life cycle model, where the sufficiently loss averse household decides on optimal consumption and investment in a portfolio with one risk-free and one risky asset. The optimal solution depends primarily on whether the household’s present value of the consumption reference levels is below, equal to, or above the present value of its endowment income. Reference levels below the endowment income are associated with the self-enhancement motive. In this case, the household avoids relative losses in consumption in any present or future state of nature (good or bad). As a result the degree of loss aversion does not directly affect optimal consumption and risk taking activity. Reference levels equal to the endowment income are associated with the belonging motive. An example would be a household comparing to others that belong to the same social class. In this case the household’s optimal consumption is the reference consumption and the household will not invest in the risky asset. Finally, reference levels above the endowment income are associated with the self-improvement motive (or high aspirations). For such high reference levels, households cannot avoid experiencing a relative loss in consumption, either now or in the future. As a result, loss aversion directly affects consumption and risky investment.     

Education and the empowerment of women in household decision‐making in Spain

It was analysed whether investment in the education of both women and men serves to empower wives resulting in more balanced household decisions being taken on matters related to consumption and financial management. They considered that household decision‐making could be made by mainly the wife, mainly the husband or the couple acting jointly. They then applied multinomial probit models to the Spanish Living Conditions Survey of 2010. Results show that, when controlling for demographic, family and labour market characteristics, the level of education of both the husband and wife has a positive effect in terms of a more egalitarian decision‐making process in relation to three areas of expenditure: daily shopping, expensive purchases of consumer durables and significant expenditure on children. However, only women's education has a positive effect on borrowing money and no effect of education is observed with regard to the use of savings. Results are less conclusive for households where decisions are taken primarily by the wife or husband, since men's education increases the role of husbands in the household making‐decision process whereas no effect of wives' education is observed.     

Relationship between foreign capital flows,domestic investment and savings in the SADC region

The importance of foreign capital in the domestic economy cannot be underestimated as it bridges the gap between domestic capital demand and supply. Given this background the paper studies the relationship between the different types of foreign capital flows in the Southern Africa Development Region (SADC) region – foreign direct investment (FDI), remittances, cross border bank flows (CBF), overseas development assistance (ODA) – and domestic savings and investment, employing the panel cointegration test and the dynamic ordinary least squares method (DOLS). The empirical results reveal that there is a strong positive relationship between domestic investment and domestic savings, FDI and remittances. These findings indicate that FDI remittances help in overcoming the limits on the domestic capital formation in the SADC region through permitting a rate of investment which is in excess of that which can be generated by domestic savings. Important policy implications on attracting foreign capital flows are discussed in the paper.     

Putting the Cart before the Horse? Re-Examining the Relationship between Domestic Savings and Economic Growth in Selected Sub-Saharan African Countries

In addition to the standard Granger causality, this paper employs the Toda–Yamamoto approach and instantaneous causality test to examine the causal relationship between domestic savings and economic growth in 10 sub-Saharan African countries utilizing time series data. Findings from both the standard Granger causality and Toda–Yamamoto approach are consistent and robust only in five countries where domestic savings and economic growth are completely independent in three countries. For the remaining two, causality runs from savings to growth. However, for the other five countries, findings produced from both causality tests are grossly inconsistent and mixed leaving us under a quandary although the Toda–Yamamoto test is often reliable on account of its ability to avoid misleading results associated with the asymptotic nature of the standard Granger causality test. Our findings further reveal an instantaneous unidirectional causality from domestic savings to economic growth for only Benin, Mali, and South Africa suggesting that savings-led growth is rapid for these countries. We conclude based on our findings that the myriad of ‘evidence’ in earlier studies on savings-growth causality should be treated with caution given that methodological differences can produce misleading results with the potential of misdirecting policy.     

Domestic or global imbalances? Rising income risk and the fall in the US current account

When default leads to exclusion from financial markets, the implied loss of consumption smoothing opportunities is more costly when income volatility is high. A rise in income risk thus makes default less attractive, allowing creditors to relax borrowing limits. I show how, in an open economy, this endogenous financial deepening may reduce aggregate foreign assets in response to a rise in individual income risk, against the precautionary savings intuition. Conditions for this depend on whether default constrains complete or uncontingent contracts. The post-1980 rise in US household income risk strongly reduces foreign assets when domestic markets are complete or world interest rates low.     

The savings multiplier

A theory of macroeconomic development based on the novel concept of savings multiplier is developed. Capital accumulation changes relative prices, amplifying incentives to save as the economy grows. The savings multiplier hinges on two mechanisms. First, accumulation raises wages and leads to redistribution from the consuming old to the saving young. Second, higher wages raise the price of old-age care and, in anticipation of this, the young save more. Our theory captures important aspects of China׳s development and suggests new channels through which the one child policy and the dismantling of social benefits have fueled China׳s savings rates.