Contribution of Philippine interest rates to financial savings : real movements and/or redistribution
Date
1992-03-18
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Abstract
Higher growth rates have generally been associated with higher rates of domestic saving. Since the accumulation of savings has been regarded as a primary condition for economic growth it is but natural for economists to seek ways of stimulating savings.
Prima facie, the natural way of increasing savings seems to be through an increase in the interest rate which represents the gain from saving. The rationale behind this being, ceteris paribus, an ordinary individual naturally prefers present consumption. In order to convince him to abstain from consuming and instead save, the level of disutility he experiences from not using up his resources now must be compensated in the form of higher rates of return, specifically, higher interest rates.
However, as our study will later show, higher interest rates may not always lead to increased savings. Moreover, interest rates may not be an effective tool in encouraging an individual to increase his savings particularly in the form of financial assets.
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Keywords
Interest rates, Financial savings, Philippines