Participation Following Sudden Access

43 Pages Posted: 17 Apr 2020 Last revised: 27 Apr 2020

See all articles by Nicola Fuchs-Schündeln

Nicola Fuchs-Schündeln

Goethe University Frankfurt

Michael Haliassos

Goethe University Frankfurt - House of Finance; Goethe University Frankfurt - Faculty of Economics and Business Administration; CEPR; NETSPAR; Goethe University Frankfurt - Institute for Monetary and Financial Stability (IMFS)

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Date Written: February 6, 2020

Abstract

The German reunification experiment provided sudden access to previously unavailable financial products, supported by knowledgeable practitioners. This setting offers new perspectives on participation, inertia, and product diffusion. Controlling for characteristics, East Germans experienced a jump in securities participation to a level comparable to West Germans’ participation immediately following reunification, and to an even higher level for consumer debt, while exhibiting inertia in previously accessible products. They showed no signs of subsequent retreat. Lower financial resources are the most important characteristic explaining lower East German participation in all asset classes, while expectations and peer effects drive the higher East German debt participation.

Keywords: Household finance, financial market participation, inertia, German reunification

JEL Classification: G5, E21, G11

Suggested Citation

Fuchs-Schündeln, Nicola and Haliassos, Michael, Participation Following Sudden Access (February 6, 2020). Journal of Monetary Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3560251

Nicola Fuchs-Schündeln

Goethe University Frankfurt ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

Michael Haliassos (Contact Author)

Goethe University Frankfurt - House of Finance

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, 60323
Germany

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
PF H32
Frankfurt am Main, D-60323
Germany

CEPR

London
United Kingdom

NETSPAR ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Goethe University Frankfurt - Institute for Monetary and Financial Stability (IMFS) ( email )

Theodor-W.-Adorno-Platz 1
Frankfurt, 60323
Germany

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