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Structure of financial savings during Indian economic reforms

Author

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  • Raghbendra Jha
  • Ibotombi S. Longjam

Abstract

This paper conducts nonparametric tests to examine whether data on financial savings in India can be rationalized in terms of a utility function of a representative economic agent. The nonparametric test has an advantage over its parametric counterpart in that it does not assume the existence of a utility function per se and checks whether the representative consumer’s demand structure can at all be rationalized by a utility function. Our test results of the necessary and sufficient conditions of the weak separability hypothesis suggest that data on financial savings in India are consistent with the existence of a utility function for a representative individual with a sub-preference where contractual savings (insurance and provident funds) can be separated out. This result could facilitate the construction of a suitable financial aggregate using these assets.

Suggested Citation

  • Raghbendra Jha & Ibotombi S. Longjam, 2004. "Structure of financial savings during Indian economic reforms," CAMA Working Papers 2004-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2004-06
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2017-02/6_jhapaper_2004.pdf
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    References listed on IDEAS

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    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
    3. Barnett, William A & Choi, Seungmook, 1989. "A Monte Carlo Study of Tests of Blockwise Weak Separability," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(3), pages 363-377, July.
    4. Swofford, James L. & Whitney, Gerald A., 1994. "A revealed preference test for weakly separable utility maximization with incomplete adjustment," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 235-249.
    5. Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149.
    6. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
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    Cited by:

    1. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram & Hjertstrand, Per, 2015. "Revealed preference tests for weak separability: An integer programming approach," Journal of Econometrics, Elsevier, vol. 186(1), pages 129-141.
    2. Hjertstrand, Per, 2013. "A Simple Method to Account for Measurement Errors in Revealed Preference Tests," Working Paper Series 990, Research Institute of Industrial Economics.
    3. Raghbendra Jha & Ibotombi Longjam, 2008. "A Divisia type saving aggregate for India," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 1(1), pages 51-66.

    More about this item

    Keywords

    Non-parametric estimation; financial assets; India;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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