Discussion Paper Series 2006-E-12

Bank Health Concerns, Low Interest Rates and Money Demand:
Evidence from the "Public Opinion Survey on Household Financial Assets and Liabilities"

Hiroshi Fujiki, Etsuro Shioji

This paper uses household survey data which covers the period from 2001 through 2003 to study the cash and deposits demand of households. This data enables us to obtain empirical findings which could not previously be derived through analyses using conventional macroeconomic time-series data. First, for asset demand, we found that the fluctuations in the extensive margin (the decisions on whether or not to hold a financial product) are sometimes more important than the fluctuations in the intensive margin (the decisions on the amounts of the financial product held). Second, we conducted detailed analyses on the causes of fluctuations in the cash demand of individual households. Third, thanks to qualitative questions in our data set, we managed to distinguish between the fluctuations in asset demand due to low interest rates and those in response to various measures that are aimed at enhancing the safety of household savings. Fourth, we quantified the economic effects of personal financial education.

Keywords: Money demand; Low interest rates; Concern for the soundness of private financial institutions; Micro data; Self-selection bias; Personal financial education; Extensive margin; Intensive margin

Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.

Copyright © 2006 Bank of Japan All Rights Reserved.

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