Formal and Informal Household Savings: How Does Trust in Financial Institutions Influence the Choice of Saving Instruments?

38 Pages Posted: 24 Aug 2017

See all articles by Elisabeth Beckmann

Elisabeth Beckmann

Oesterreichische Nationalbank (OeNB)

Davide Salvatore Mare

World Bank - Research Department; University of Edinburgh - Business School

Date Written: August 1, 2017

Abstract

We investigate whether trust in different financial institutions influences the choice of saving instruments. Is trust a significant determinant of household saving behavior? How does trust in different financial institutions affect the composition of household savings? Using unique survey data for ten emerging market economies in Central, Eastern and Southeastern Europe, we show that trust in the financial system increases the probability of holding formal savings and the diversification among formal saving instruments. Trust in the financial system and in foreign banks are significantly associated with holding contractual and capital market saving instruments. Trust in the safety of deposit has the largest positive effect on bank savings. Trust in domestic banks increases the likelihood of holding formal savings the most and trust in foreign banks decreases holdings of informal savings the most.

Keywords: Household Finance, Formal Savings, Informal Savings, Trust in Banks, Trust in the Financial System

JEL Classification: O16, G11, D12, D14, P34

Suggested Citation

Beckmann, Elisabeth and Mare, Davide Salvatore and Mare, Davide Salvatore, Formal and Informal Household Savings: How Does Trust in Financial Institutions Influence the Choice of Saving Instruments? (August 1, 2017). Available at SSRN: https://ssrn.com/abstract=3023711 or http://dx.doi.org/10.2139/ssrn.3023711

Elisabeth Beckmann (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

Davide Salvatore Mare

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

University of Edinburgh - Business School ( email )

Edinburgh, Scotland
United Kingdom

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