Save or borrow – what determines Russian households’ financial strategies?
AbstractThis paper examines what influences Russian households’ decisions to save and borrow. We use the 2008 data from the 17th round of the Russia Longitudinal Monitoring Survey (RLMS-HSE). Our results show that the determinants of saving and borrowing are not only those suggested by economic theory but also include psychological and sociological considerations: smarter respondents, who are satisfied with their lives and inclined to help other people, are more likely to save. Those who enjoy stable or improving financial conditions and/or are satisfied with them are more likely to save and less likely to borrow. Financial literacy, a factor cited by institutional theory as positive for both saving and borrowing from banks, lost its significance at the onset of the financial crisis. Household income, suggested by economic theory as a basis for choosing a financial strategy, was found to have much less influence on savings and to have a positive influence on borrowing, confirming the rationing theory rather than inter-temporal choice theory. Surprisingly, the fear of job loss does not make people save more, contrary to the precautionary motive.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 28/2011.
Length: 36 pages
Date of creation: 04 Nov 2011
Date of revision:
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More information through EDIRC
household; Russia; saving; bank loans;
Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-14 (All new papers)
- NEP-CIS-2011-11-14 (Confederation of Independent States)
- NEP-CWA-2011-11-14 (Central & Western Asia)
- NEP-TRA-2011-11-14 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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