Abstract
Based on the micro-data of China Household Finance Survey, this paper analyzes the effects of credit constraints on household selection of financial assets empirically. The results show that credit constraints have the significant negative impact on participation rate and allocation ratio of savings, stock, risky financial assets. Credit constraints keep families from holding much savings. Those families who face credit constraints have to use their own money to meet the demand of funds without bank loans. Those families who face credit constraints are no willing to invest in stock market and hold less risky assets because of their lower risk tolerance. Besides, credit constraints can increase the participation rate of informal borrowing and reduce household private lending. There are few domestic articles analyzing the relationship between credit constraints and household selection of financial assets. Therefore, this paper can be more of reference value for the follow-up study. Meanwhile, the results show that reducing credit constraints is helpful for the household participation in capital market.
Highlights
In recent years, the economy of China developed stably, domestic residents’ disposable income increased rapidly as well
National Bureau of Statistics announced that the growth rate of per capita disposable income in China had reached 8% in 2014, which was faster than the economic growth rate
This paper analyzes the effects of credit constraints on household selection of financial assets by using micro-data from China Household Finance Survey
Summary
The economy of China developed stably, domestic residents’ disposable income increased rapidly as well. Because of the rapidly increasing of domestic residents’ disposable income, the scale of household financial assets becomes larger and larger. The selection of financial assets has become the core issue of household financial investment. The scale of household debt increased rapidly, from 17.2 billion in 1997 to 5.54 trillion in 2009, which had. (2016) Credit Constraints and Household Selection of Financial Assets. In the past ten years, mortgages, consumer loans and credit card loans had greatly changed the habits of domestic residents’ consumption and saving. Many families prefer to use the credit instruments to smooth the demand of consumption and investment, rather than only rely on savings to adjust the income and expenditure. We have every reason to believe that the behavior of household borrowing will greatly affect household economic decision
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