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Financial Liberalization and Household Financial Behaviour in India

Author

Listed:
  • Gauthier Lanot

    (Keele University, Department of Economics)

  • Peter Lawrence

    (Keele University, Department of Economics)

Abstract

Changes in financial policy are expected to result in the greater availability of credit as financial controls are relaxed and banking competition is increased. This ‘financial deepening’ should show up in ahigher consumption expenditure in areas where credit is often required, such as durable consumption, education and health. We use the household consumption data collected by India’s National Sample Survey Organisation for 11 rounds which straddle the period before and during financial liberalization (i.e. 1987-2000).We generate measures of the within-households shifts in distribution of consumption and see how far these are correlated with financial development variables. We find that at the macro level, financial depth did not increase from the beginning to the end of the period under study. However we did find some association between some of the financial development variables and expenditure on durables goods, although the changes in behaviour are very small.

Suggested Citation

  • Gauthier Lanot & Peter Lawrence, 2005. "Financial Liberalization and Household Financial Behaviour in India," Keele Economics Research Papers KERP 2005/15, Centre for Economic Research, Keele University.
    • Handle: RePEc:kee:kerpuk:2005/15
    Note: This paper is an output of Research Project R7968 ‘The Effects of Macro-financial policy on household micro-financial behaviour’ funded by the Department for International Development (DFID) Social Science Research (formerly ESCOR). The views expressed here do not necessarily represent those of DFID. Thanks are due to Ibo Longjam, Peter Quartey and Tarja Viitanen for research assistance at various stages of the project. The views expressed here do not necessarily represent those of DFID.
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    More about this item

    Keywords

    Financial liberalization; financial depth; durables; household consumption; credit.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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