Peer-reviewed economic literature indicates that changes in discount rates influence household intertemporal choices, consumption behaviors, and financial activities.
This paper analyzes the effectiveness of the electricity social rate, the Bono Social de Electricidad, introduced in 2009 in Spain’s electricity market. It is a policy aimed at increasing the affordability of electricity by entailing a discount on prices for vulnerable consumers. Using data from the family budget survey from 2006 to 2017, we rely on a difference-in-differences approach to measure its causal impact on energy poverty and to further analyze how the introduction of this measure affected the consumption behavior of households. We find that, on average, the introduction of the policy has reduced the likelihood of energy poverty of households eligible to the social rate. Nevertheless, the magnitude of the effect is quite modest as it corresponds in practice to only 59,000 households that are no longer in energy poverty as a result of the measure. We further show that, in reaction to lower effective prices, households do not increase their consumption of electricity. In other words, the increased affordability did not induce a change in the consumption behavior in terms of quantities purchased but it entirely resulted in a decrease in electricity expenditure.
Direct estimates of the interest elasticity of saving suffer from several serious problems. As an alternative, this survey uses an indirect approach that combines models of individual behavior with estimates of certain features of individuals' preferences. The paper examines the effect of interest-rate changes on the consumption and saving of people who follow the lifecycle model, who plan to leave bequests, who save to reach a fixed target, and who have short planning horizons. The models that likely describe the behavior of the people who account for most of aggregate saving imply positive interest elasticities of saving.
The monetary policy of the central bank of any state is designed to regulate the money supply through the use of many monetary instruments. The use of the discount rate, foreign exchange interventions, the reduction or increase of required bank reserves according to classical Keynesianism should influence the intertemporal choice of households. However, not all tools have the same effect on household choices and therefore studying the effectiveness of their use is relevant. The purpose of the article is to study the impact of the central bank's monetary policy on financial and investment activities of the population. Determining the effectiveness of monetary policy instruments used by central banks through the prism of the new Keynesian school. The following scientific methods were used during the research: analysis and synthesis, deductive method, analogy method, modeling, system approach, abstraction method. Monetary policy of central banks affects the economy. Changes in the discount rate increase the number of loans and deposits, change interest rates in the loan capital market. In the long run, this affects the dynamics and growth rates of loans and deposits. However, household income and consumption levels have a significant impact on household decisions about current and future consumption, intensification or, conversely, reduction of financial and investment activities. Reducing the discount rate to 6% did not lead to an increase in retail deposits and the number of s
We study climate change in a model with a carbon-intensive and a green sector, each subject to stochastic sectoral productivity shocks, and show how the underlying economic structure affects the risk-adjusted discount rate and the climate risk premium in the social cost of carbon (SCC). Consumption growth, aggregate consumption volatility, and the climate beta are all affected by the elasticity of substitution between the two sectors and the relative size of the sectors, and vary as the green transition progresses. The climate risk premium is hump-shaped during the green transition, with the climate beta playing a dominant role in its magnitude. For sufficiently strong substitutability between the two sectors and sufficiently low correlation between the sectoral shocks, decarbonisation can temporarily reduce aggregate consumption risk, as the climate beta becomes negative in the mid phase of the transition. The risk-adjusted discount rate first falls then rises during the green transition, leading to a SCC to GDP ratio that rises then falls as the green sector grows. We illustrate our analytical results numerically.
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