Effects of Shifting Saving Patterns on Interest Rates and Economic Activity
Individuals in the United States consistently do most of their saving through financial intermediaries, but over time there have been and continue to be major shifts in people's reliance on specific kinds of intermediary institutions. In recent years, for example, individual savers have relied progressively more on pensions and thrift institutions and progressively less on life insurance companies. Moreover, legislative and regulatory actions currently under discussion would further alter the pattern of individuals' saving flows. This paper assesses the potential effects on interest rates, and via interest rates (and asset prices and yields more generally) on nonfinancial economic activity, of four specific shifts in saving behavior: additional pension contributions financed by individuals, additional pension contributions financed by businesses, additional purchases of life insurance by individuals, and additional deposits in thrift institutions by individuals. The paper's results indicate that such shifts, in plausible magnitudes, would have significant effects not only on interest rates and asset-liability flows but also on both the level and the composition of nonfinancial economic activity. In particular, although the specific effects differ from one shift to another, each would disproportionately stimulate capital formation in comparison to other forms of spending.
|Date of creation:||Dec 1980|
|Date of revision:|
|Publication status:||published as Friedman, Benjamin M. "Effects of Shifting Saving Patterns on Interest Rates and Economic Activity." The Journal of Finance, Vol. 37, No. 1, (March 1982), pp. 37-62.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Frank de Leeuw & Edward Gramlich, 1968. "The Federal Reserve-MIT economic model," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 11-40.
- Oldfield, George S, Jr, 1977. "Financial Aspects of the Private Pension System," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(1), pages 48-54, February.
- Lintner, John, 1969. "The Aggregation of Investor's Diverse Judgments and Preferences in Purely Competitive Security Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 4(04), pages 347-400, December.
- Feldstein, Martin S & Eckstein, Otto, 1970. "The Fundamental Determinants of the Interest Rate," The Review of Economics and Statistics, MIT Press, vol. 52(4), pages 363-75, November.
- Friedman, Benjamin Morton, 1977. "Financial Flow Variables and the Short-Run Determination of Long-Term Interest Rates," Scholarly Articles 4554309, Harvard University Department of Economics.
- Friedman, Benjamin M, 1980. "The Effect of Shifting Wealth Ownership on the Term Structure of Interest Rates: The Case of Pensions," The Quarterly Journal of Economics, MIT Press, vol. 94(3), pages 567-90, May.
- de Leeuw, Frank & Gramlich, Edward M, 1969. "The Channels of Monetary Policy: A Further Report on the Federal Reserve-M.I.T. Model," Journal of Finance, American Finance Association, vol. 24(2), pages 265-90, May.
- Dwight M. Jaffee & Kenneth T. Rosen, 1979. "Mortgage Credit Availability and Residential Construction," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 333-386.
- Feldstein, Martin, 1978.
"Do private pensions increase national savings?,"
Journal of Public Economics,
Elsevier, vol. 10(3), pages 277-293, December.
- Bischoff, Charles W, 1970. "A Model of Nonresidential Construction in the United States," American Economic Review, American Economic Association, vol. 60(2), pages 10-17, May.
- Friedman, Benjamin M, 1977. "Financial Flow Variables and the Short-Run Determination of Long-Term Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 661-89, August.
- Franco Modigliani & Richard Sutch, 1967. "Debt Management and the Term Structure of Interest Rates: An Empirical Analysis of Recent Experience," Journal of Political Economy, University of Chicago Press, vol. 75, pages 569.
- Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
- Zvi Bodie, 1980. "Purchasing-Power Annuities: Financial Innovation for Stable Real Retirement Income in an Inflationary Environment," NBER Working Papers 0442, National Bureau of Economic Research, Inc.
- Ando, Albert K, 1974. "Some Aspects of Stabilization Policies, the Monetarist Controversy, and the MPS Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(3), pages 541-71, October.
- Stiglitz, Joseph E, 1970. "A Consumption-Oriented Theory of the Demand for Financial Assets and the Term Structure of Interest Rates," Review of Economic Studies, Wiley Blackwell, vol. 37(3), pages 321-51, July.
- Feldstein, Martin S & Chamberlain, Gary, 1973. "Multimarket Expectations and the Rate of Interest," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(4), pages 873-902, November.
- Modigliani, Franco & Shiller, Robert J, 1973. "Inflation, Rational Expectations and the Term Structure of Interest Rates," Economica, London School of Economics and Political Science, vol. 40(157), pages 12-43, February.
- Hopewell, Michael H & Kaufman, George G, 1973. "Bond Price Volatility and Term to Maturity: A Generalized Respecification," American Economic Review, American Economic Association, vol. 63(4), pages 749-53, September.
- Benjamin M. Friedman & V. Vance Roley, 1979. "A Note on the Derivation of Linear Homogeneous Asset Demand Functions," NBER Working Papers 0345, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0587. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.