IDEAS home Printed from https://ideas.repec.org/a/bla/etrans/v11y2003i3p513-537.html
   My bibliography  Save this article

Determinants of household savings in China and their role in quasi‐money supply

Author

Listed:
  • Duo Qin

Abstract

This study derives household saving potential empirically from econometric models of Chinese urban and rural household consumption and uses this potential to explain household bank deposits. Model simulations are performed to analyse the effects of interest rates, income and income uncertainty on the saving potential and the bank deposits. The bank deposits variable is then used to explain quasi‐money supply. High bank absorption of household savings is found to account mainly for the rapid growth in quasi‐money, which in turn explains the exceptionally high M2/GDP ratio. Households’ savings are largely predictable from their regular consumption.

Suggested Citation

  • Duo Qin, 2003. "Determinants of household savings in China and their role in quasi‐money supply," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 513-537, September.
    • Handle: RePEc:bla:etrans:v:11:y:2003:i:3:p:513-537
    DOI: 10.1111/1468-0351.00161
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1468-0351.00161
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1468-0351.00161?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Caballero, Ricardo J., 1990. "Consumption puzzles and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 113-136, January.
    2. Qin, Duo, 1994. "Money demand in China: The effect of economic reform," Journal of Asian Economics, Elsevier, vol. 5(2), pages 253-271.
    3. Ericsson, Neil R & Hendry, David F & Mizon, Grayham E, 1998. "Exogeneity, Cointegration, and Economic Policy Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 370-387, October.
    4. Qin, Duo & Gilbert, Christopher L., 2001. "The Error Term In The History Of Time Series Econometrics," Econometric Theory, Cambridge University Press, vol. 17(2), pages 424-450, April.
    5. Pagan, Adrian, 1987. "Three Econometric Methodologies: A Critical Appraisal," Journal of Economic Surveys, Wiley Blackwell, vol. 1(1), pages 3-24.
    6. Song, Haiyan & Liu, Xiaming & Romilly, Peter, 1996. "A Time Varying Parameter Approach to the Chinese Aggregate Consumption Function," Economic Change and Restructuring, Springer, vol. 29(3), pages 185-203.
    7. Angus Deaton & Christina Paxson, 2000. "Growth and Saving Among Individuals and Households," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 212-225, May.
    8. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
    9. Yingyi Qian, 1988. "Urban and Rural Household Saving in China," IMF Staff Papers, Palgrave Macmillan, vol. 35(4), pages 592-627, December.
    10. Neil R. Ericsson & John S. Irons, 1995. "The Lucas critique in practice: theory without measurement," International Finance Discussion Papers 506, Board of Governors of the Federal Reserve System (U.S.).
    11. Gilbert, Christopher L, 1986. "Professor Hendry's Econometric Methodology," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 283-307, August.
    12. Muellbauer, John, 1983. "Surprises in the Consumption Function," Economic Journal, Royal Economic Society, vol. 93(369a), pages 34-50, Supplemen.
    13. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-871, September.
    14. Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-129, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. He, Xinhua, 2005. "Aggregate business investment in China and UK," Journal of Policy Modeling, Elsevier, vol. 27(6), pages 733-742, September.
    2. Richard CK Burdekin & Ilan Noy, 2005. "What Has Driven Chinese Monetary Policy Since 1990? Investigating the People's Bank's Policy Rule," Economics Study Area Working Papers 85, East-West Center, Economics Study Area.
    3. Rui Yao & Yilan Xu, 2015. "Chinese Urban Households’ Security Market Participation: Does Investment Knowledge and Having a Long-Term Plan Help?," Journal of Family and Economic Issues, Springer, vol. 36(3), pages 328-339, September.
    4. Thomas Vendryes, 2011. "Migration constraints and development: Hukou and capital accumulation in China," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00783794, HAL.
    5. Tauni, Muhammad Zubair & Yousaf, Salman & Ahsan, Tanveer, 2020. "Investor-advisor Big Five personality similarity and stock trading performance," Journal of Business Research, Elsevier, vol. 109(C), pages 49-63.
    6. Burdekin, Richard C.K. & Siklos, Pierre L., 2008. "What has driven Chinese monetary policy since 1990? Investigating the People's bank's policy rule," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 847-859, September.
    7. Vendryes, Thomas, 2011. "Migration constraints and development: Hukou and capital accumulation in China," China Economic Review, Elsevier, vol. 22(4), pages 669-692.
    8. Cheng Fan Fah & Abbas Hassani, 2014. "A Study of Islamic and Conventional Banks in Malaysia دراسة البنوك الإسلامية والتقليدية في ماليزيا," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 27(1), pages 73-99, January.
    9. Duo QIN & Xinhua HE & Pilipinas QUISING & Shiguo LIU, 2010. "Modeling Monetary Policies in China (PRC)," EcoMod2004 330600115, EcoMod.
    10. Dennis Tao Yang & Junsen Zhang & Shaojie Zhou, 2012. "Why Are Saving Rates So High in China?," NBER Chapters, in: Capitalizing China, pages 249-278, National Bureau of Economic Research, Inc.
    11. Shulian Zhang, 2005. "Consumption Behaviour Under Institutional Transitions in China," School of Economics and Finance Discussion Papers and Working Papers Series 189, School of Economics and Finance, Queensland University of Technology.
    12. Qin, Duo & Quising, Pilipinas & He, Xinhua & Liu, Shiguo, 2005. "Modeling monetary transmission and policy in China," Journal of Policy Modeling, Elsevier, vol. 27(2), pages 157-175, March.
    13. Rui Yao & Jing Xiao & Li Liao, 2015. "Effects of Age on Saving Motives of Chinese Urban Consumers," Journal of Family and Economic Issues, Springer, vol. 36(2), pages 224-238, June.
    14. Shaojie Zhou & Junsen Zhang, 2016. "Chinese Saving Rates from 1953 to 2012: Trends, Compositions and Prospects," Pacific Economic Review, Wiley Blackwell, vol. 21(2), pages 227-252, May.
    15. Guangjian Xu & Liyuan Dai & Jipeng Zhong, 2010. "Why Has China’s Final Consumption Rate Declined Since 1978? Causes and Implications," Journal of Family and Economic Issues, Springer, vol. 31(3), pages 338-352, September.
    16. Qin, Duo & Cagas, Marie Anne & Ducanes, Geoffrey & He, Xinhua & Liu, Rui & Liu, Shiguo, 2009. "Effects of income inequality on China's economic growth," Journal of Policy Modeling, Elsevier, vol. 31(1), pages 69-86.
    17. Qin, Duo & Cagas, Marie Anne & Ducanes, Geoffrey & He, Xinhua & Liu, Rui & Liu, Shiguo, 2006. "Income Disparity and Economic Growth: Evidence from People's Republic of China," ADB Economics Working Paper Series 84, Asian Development Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Charles G. Renfro, 2009. "The Practice of Econometric Theory," Advanced Studies in Theoretical and Applied Econometrics, Springer, number 978-3-540-75571-5.
    2. Julia Campos & Neil R. Ericsson & David F. Hendry, 2005. "General-to-specific modeling: an overview and selected bibliography," International Finance Discussion Papers 838, Board of Governors of the Federal Reserve System (U.S.).
    3. Yulei Luo & William T. Smith & Heng-fu Zou, 2009. "The Spirit of Capitalism and Excess Smoothness," Annals of Economics and Finance, Society for AEF, vol. 10(2), pages 281-301, November.
    4. Hubbard, R. Glenn & Skinner, Jonathan & Zeldes, Stephen P., 1994. "The importance of precautionary motives in explaining individual and aggregate saving," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 59-125, June.
    5. Alba Lugilde & Roberto Bande & Dolores Riveiro, 2018. "Precautionary saving in Spain during the great recession: evidence from a panel of uncertainty indicators," Review of Economics of the Household, Springer, vol. 16(4), pages 1151-1179, December.
    6. Erik Hurst & Arthur Kennickell & Annamaria Lusardi & Francisco Torralba, 2005. "Precautionary Savings and the Importance of Business Owners," NBER Working Papers 11731, National Bureau of Economic Research, Inc.
    7. Lorenzo Pozzi, 2011. "The Time-Varying Volatility of Earnings and Aggregate Precautionary Savings," Tinbergen Institute Discussion Papers 11-144/2, Tinbergen Institute.
    8. Arthur Kennickell & Annamaria Lusardi, 2004. "Disentangling the Importance of the Precautionary Saving Mode," NBER Working Papers 10888, National Bureau of Economic Research, Inc.
    9. Gomes, Fábio Augusto Reis & Ribeiro, Priscila Fernandes, 2015. "Estimating the elasticity of intertemporal substitution taking into account the precautionary savings motive," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 108-123.
    10. Carroll, Christopher D. & Samwick, Andrew A., 1997. "The nature of precautionary wealth," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 41-71, September.
    11. Daria Pignalosa, 2019. "On the role of the utility function in the estimation of preference parameters," Metroeconomica, Wiley Blackwell, vol. 70(4), pages 793-820, November.
    12. Faust, Jon & Whiteman, Charles H., 1997. "General-to-specific procedures for fitting a data-admissible, theory-inspired, congruent, parsimonious, encompassing, weakly-exogenous, identified, structural model to the DGP: A translation and criti," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 47(1), pages 121-161, December.
    13. Kim, Seewon, 2013. "Prudent consumers: New evidence from the Consumer Expenditure Survey," Economic Modelling, Elsevier, vol. 33(C), pages 77-85.
    14. Lugilde, Alba & Bande, Roberto & Riveiro, Dolores, 2017. "Precautionary Saving: a review of the theory and the evidence," MPRA Paper 77511, University Library of Munich, Germany.
    15. Daria Pignalosa, 2021. "The Euler Equation Approach: Critical Implications of Recent Developments in the Theory of Intertemporal Choice," Bulletin of Political Economy, Bulletin of Political Economy, vol. 15(1), pages 1-43, June.
    16. Meissner, Thomas & Rostam-Afschar, Davud, 2017. "Learning Ricardian Equivalence," Journal of Economic Dynamics and Control, Elsevier, vol. 82(C), pages 273-288.
    17. Karimova, Amira & Simsek, Esra & Orhan, Mehmet, 2020. "Policy implications of the Lucas Critique empirically tested along the global financial crisis," Journal of Policy Modeling, Elsevier, vol. 42(1), pages 153-172.
    18. Panagiotidis, Theodore & Printzis, Panagiotis, 2020. "What is the investment loss due to uncertainty?," Global Finance Journal, Elsevier, vol. 45(C).
    19. Emilio Fernandez-Corugedo, 2004. "Consumption Theory," Handbooks, Centre for Central Banking Studies, Bank of England, number 23, April.
    20. Thomas Meissner, 2016. "Intertemporal consumption and debt aversion: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(2), pages 281-298, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:etrans:v:11:y:2003:i:3:p:513-537. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/ebrdduk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.