Financial Deregulation and Household Saving
Bank of England Working Paper No. 5
Posted: 3 Aug 1998
Date Written: October 1992
An overlapping generation model of the effects of financial deregulation is developed. The results indicate that deregulation will produce an exogenous short-run fall in saving, some of which will be recouped over time, while increasing the sensitivity of saving to wealth, current income, real interest rates and demographic factors. Empirical tests using regional saving data for the United Kingdom are reported and found to generally accord with the theoretical model. It is estimated that deregulation caused an autonomous fall of 2?% in the personal saving rate of the United Kingdom over the 1980s.
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