Borrowing Constraints,Home Ownership and Housing Choice: Evidence from Intra‐Family Wealth Transfers

We study the impact of borrowing constraints on home ownership and housing demand by comparing the tenure choice and housing quality of consumers who receive intra‐family wealth transfers to those that do not. Our analysis is based on household‐level panel data providing information on the receipt of wealth transfers, changes in tenure status as well as changes in the size and quality of housing. On average we find that the receipt of a wealth transfer increases the propensity of consumers to transition from renters to home‐owners by 6–8 percentage points (35% of the sample mean). Additional analyses suggest that this effect is unlikely to be driven by wealth effects and can thus be attributed to the relaxation of borrowing constraints. By contrast, wealth transfers do not increase the likelihood that existing homeowners “trade‐up” to larger homes in better locations.     

Saving under uncertainty: A bivariate non-expected utility approach

We adopt the multivariate non-expected utility approach proposed by Yaari [1986] to provide a characterization of the comparative statics effects of greater risk aversion and of mean-preserving increases in risk on saving and borrowing in the presence of income and interest rate risk.We show that in Yaari's model, it is possible to extend the applicability of the Diamond and Stiglitz [1974] and Kihlstrom and Mirman [1974] (DSKM) single-crossing property to establish a relationship between greater risk aversion and saving (or borrowing) on the basis of the individual's ordinal preferences as long as the two risks are independent. We also demonstrate that the comparative statics effects of a joint mean-preserving increase in random income and interest rate on saving and borrowing can be determined by an extension of the DSKM single-crossing property.     

Early influences on saving behaviour: Analysis of British panel data

Using data from the British Household Panel Survey and Understanding Society, we examine the saving behaviour of individuals over time. Initially, we explore the determinants of the saving behaviour of children aged 11–15. Our findings suggest that parental allowances/pocket money (earnings from part-time work) lower (increase) the probability that a child saves. There is also evidence that the financial expectations of the head of household have an influence on their offspring’s saving behaviour, where children of optimistic parents have a lower probability of saving by approximately 2 percentage points. However, there is no evidence of an intergenerational correlation in savings behaviour: the saving behaviour of parents appears to have no bearing on the saving decisions of their offspring. We then go on to explore the implications of the saving behaviour of children for their savings decisions in later life, specifically when observed in early adulthood. We find that having saved as a child has a large positive influence both on the probability of saving on a monthly basis and on the amount saved as an adult. This finding is robust to alternative empirical strategies including IV analysis where the most conservative estimates show that having saved as a child increases the probability of saving during adulthood by 12 percentage points.     

Household portfolio choices,health status and health care systems: A cross-country analysis based on SHARE

Health risk is increasingly viewed as an important form of background risk that affects household portfolio decisions. However, its role might be mediated by the presence of a protective full-coverage national health service that could reduce households’ probability of incurring current and future out-of-pocket medical expenditures. We use SHARE data to study the influence of current health status and future health risk on the decision to hold risky assets, across ten European countries with different health systems, each offering a different degree of protection against out-of-pocket medical expenditures. We find robust empirical evidence that perceived health status matters more than objective health status and, consistent with the theory of background risk, health risk affects portfolio choices only in countries with less protective health care systems. Furthermore, portfolio decisions consistent with background risk models are observed only with respect to middle-aged and highly-educated investors.     

What expenditure does Anglosphere foreign borrowing fund?

This paper examines the extent to which foreign borrowing funds private investment, consumption and government expenditure in the United States, the United Kingdom, Australia, and New Zealand (the Anglosphere), advanced economies which have been the world's largest international borrowers since 1990. Using a bivariate predictive regression model, we estimate the relative importance of these expenditure aggregates as predictors of their external deficits, and hence foreign borrowing. Overall, based on quarterly macroeconomic data for the period 1990–2011, the evidence suggests that foreign borrowing has not financed higher household consumption in these economies over recent decades, with the possible exception of the United States. While results concerning government spending are mixed due to policy reaction, business cycle and public-private saving offset effects, strong results for private investment augur well for the sustainability of this grouping's foreign borrowing.     

金融素养与家庭储蓄率——基于理财规划与借贷约束的解释

金融科技的发展使得人们参与金融市场的门槛与成本迅速降低,金融产品也不断丰富,金融市场参与者的异质性增加,金融素养对家庭金融决策的影响越来越明显。本文研究发现:(1)家庭在安排储蓄与消费时,金融素养有显著影响,金融素养与家庭储蓄率呈倒U型关系。(2)理财规划和借贷约束是影响家庭储蓄率上升的两个渠道。(3)金融素养由低逐渐升高时,家庭的理财规划意识增强,通过提高储蓄率来保障资金充足。当金融素养增加到一定程度,理财规划意识优化资产配置的作用增强,抑制消费的作用减弱,同时借贷约束缓解会帮助家庭增加消费。本文的发现有助于厘清家庭储蓄率差异的成因,对提升居民福利,增强金融教育政策的针对性,有积极意义。     

The Impact of Sampling Errors on the Choice of Portfolio Efficiency Analysis Rules with Borrowing and Lending of a Riskless Asset

This paper evaluates the impact of sampling errors on portfolio decisions using mean-variance and stochastic dominance rules where riskless borrowing and lending opportunities exist. The paper establishes criteria for comparing the alternative decision rules (for example, mean variance versus stochastic dominance) according to their effectiveness and the cost (in sampling error terms). Normal distributions are simulated using various assumed means, standard deviations, correlations, and sample sizes. These simulations enable one to evaluate the impact of sampling errors on the potential effectiveness of the empirical stochastic dominance and mean variance rules that include borrowing and lending of a riskless asset.     

家庭个体特征对居民借款行为的影响——来自中国家庭的经验证据

金融市场对于支持和鼓励家庭借款进而刺激家庭消费起着愈发重要的作用。作为家庭消费金融意识的重要体现,居民借款行为正在受到更多的关注。本文认为居民家庭借款行为包含两层含义:1.家庭是否有借款;2.家庭借款渠道的选择。利用CFPS调查项目中京沪粤三省市家庭借款行为的微观数据,本文运用Logit模型和Probit模型对影响居民家庭借款行为的家庭个体特征进行了实证分析,解析了不同家庭个体特征对借款行为的影响情况,并得出有关结论与启示。     

The Interdependent and Intertemporal Nature of Financial Decisions: An Application to Cash Flow Sensitivities

We develop a dynamic multiequation model where firms make financing and investment decisions jointly subject to the constraint that sources must equal uses of cash. We argue that static models of financial decisions produce inconsistent coefficient estimates, and that models that do not acknowledge the interdependence among decision variables produce inefficient estimates and provide an incomplete and potentially misleading view of financial behavior. We use our model to examine whether firms are constrained from accessing capital markets. Unlike static single‐equation studies that find firms underinvest given cash flow shortfalls, we conclude that firms maintain investment by borrowing.     

Does microfinance change informal lending in village economies? Evidence from Bangladesh

This paper examines how availability of microfinance influences households’ borrowing from informal sources in village economies. It uses a unique household level panel data set, which spans more than two decades (1987–2008), from rural Bangladesh. We find that households’ access to microfinance reduces the incidence of borrowing from informal sources, but not the amount of borrowing. We find that less poor households benefit more in terms of reducing their reliance on informal borrowing and that the benefit accrues over time. We also find that having access to microfinance increases women’s informal borrowing for small consumption usage, without facilitating access to new business opportunities.     

Is there a CSI-leverage nexus?

We examine how various measures of consumer sentiment index (CSI) affect firms' debt policy decisions. Using U.S. firm-level quarterly data from 1993 to 2017, we provide a strong positive relationship between CSI measures and corporate debt policy, implying that firms use external borrowing during a positive economic outlook and reap the tax-shield benefit. We also find that improved household optimism over financial and business sentiments leads to future household consumption. The CSI-leverage nexus is moderated by the state of firms' financial condition, reputation, and profitability. Importantly, our results are robust to sub-sample analysis, firm-level and macroeconomic controls, econometric specifications, alternative measures of sentiment including Shiller's cyclically adjusted price-earnings ratio (i.e., CAPE_SH), Baker and Wurgler (2006)’s stock market sentiment index (i.e., SENT_BW) and search-based uncertainty measure such as FEARS (i.e., Financial and Economic Attitudes Revealed by Search) index of Da, Engelberg, and Gao (2015).     

Modelling optimal asset allocation when households experience health shocks

Health status is an important factor in household portfolio decision-making. We develop a theoretical framework to model how households make optimal asset allocation decisions in response to health risks. Our two- and three-asset models both suggest that the maximum utility is derived when households allocate a majority of their assets to human capital. When households experience acute illness shocks, their welfare and portfolio values reduce, and they need to increase their investment in human capital. When an expensive health catastrophe befalls member(s) of households, the optimal decision for asset-rich households is to undertake medical treatment, whereas for asset-poor households it is to forgo treatment. Asset-poor households in particular require public financial assistance to enable them to invest in human capital.     

中国居民储蓄率的特征事实及其政策含义

本文使用资金流量表数据探讨了中国国民储蓄的部门特征以及居民储蓄在其中的地位及其变化、研究显示：1978年以来。中国居民储蓄率总体上呈现出明显的上升趋势,其中在上世纪90年代的增速最快．而在2000年以后一直保持在较高水平：并且中国的居民储蓄率明显高于世界主要发达国家和转型经济国家的同期水平;从国民储蓄的部门特征来看：居民储蓄始终是国民储蓄中最重要且稳定的组成部分,进一步的分析显示．近年来居民部门的收入占比呈现出较大幅度的下降,但居民储蓄倾向却增长明显,从而导致居民部门储蓄率的基本稳定。文章最后提出了相关的政策建议．     

Limited participation and consumption-saving puzzles: A simple explanation and the role of insurance

In this paper, we show that the existence of a large, negative wealth shock and insufficient insurance against such a shock could explain both the limited stock market participation puzzle and the low-consumption–high-savings puzzle. We then conduct an empirical analysis on the relation between household portfolio choices and access to private insurance and various types of government safety nets. The empirical results demonstrate that a lack of insurance against large, negative wealth shocks is positively correlated with lower participation rates and higher saving rates. Overall, the evidence suggests an important role of insurance in household investment and savings decisions.     

The Determinants of Household Saving in China: A Dynamic Panel Analysis of Provincial Data

In this paper, we conduct a dynamic panel analysis of the determinants of the household saving rate in China using a life cycle model and panel data on Chinese provinces for the 1995–2004 period from China's household survey. We find that China's household saving rate has been high and rising and that the main determinants of variations over time and over space therein are the lagged saving rate, the income growth rate, (in many cases) the real interest rate, and (in some cases) the inflation rate. However, we find that the variables relating to the age structure of the population have the expected impact on the household saving rate in only one of the four samples. These results provide mixed support for the life cycle hypothesis as well as the permanent income hypothesis, are consistent with the existence of inertia or persistence, and imply that China's household saving rate will remain high for some time to come.     

Military experience and household stock market participation: Evidence from China

This paper examines the relationship between military experience and household stock market participation. Using data from the 2010 wave of China Family Panel Studies (CFPS), we find that the military experience promotes the households participating in the stock market. We further investigate how military experience affects a household investment decision. The results show that the level of risk-taking and social trust of military households mainly drives the positive nexus. Moreover, the length of military service rather than the age affects household equity investment decisions. We also find that the positive relationship is more prominent in high-income households, and low-education households.     

Financing decisions of firms and central bank policy

This paper aims to explain why unhedged foreign borrowing by South East Asian corporations rose sharply during the few years prior to the crisis despite little change in fundamentals. We show that decisions of firms and decisions of the central bank are complementary. Consequently, a small shock to fundamentals may have a large and permanent impact on the equilibrium composition of firms’ borrowing.     

Consumer Credit Risk Characteristics: Understanding Income and Expense Differentials

This study investigates the consumer credit risk characteristics of Turkish households by analyzing factors related to their income and expense differentials. This study assumes that the income and expense patterns are the key elements of consumer credit risk. Based on a data set ranging from 8,551 to 25,566 households, during the period 2003-5, we employ a logistic regression method to model the determinants of income and expense differentials. We first concentrate on the income-expense balance of households to highlight those that are eligible for consumer credit. We reinforce our results by further analyzing the expenditure behaviors of households to find those that should be either primarily eliminated or targeted for consumer credit by financial institutions. Our overall results provide evidence on the factors identifying household income and expense profiles and, hence, consumer credit risk characteristics of Turkish households.     

How do house prices affect consumption? Evidence from micro data

Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households’ consumption decisions. Rising house prices may stimulate consumption by increasing households’ perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters. This finding is consistent with heterogeneity in the wealth effect across these groups. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions.     

House prices,consumption and the role of non-Mortgage debt

This paper evaluates the strength of the relationship between house prices and consumption, through the use of debt. Whereas the existing literature has largely studied the effects of house prices on homeowner total or mortgage debt, we focus on the non-mortgage component of household borrowing, using Canadian household-level data for 1999–2007. We rely on variation in regional house prices, homeownership status and age to establish the relationship between house prices and non-mortgage debt. Then, using direct information on debt uses, we determine that house price growth was associated with a non-trivial fraction of concurrent aggregate non-housing consumption growth.