The Impact of Federal Interest Rate Regulations on the Small Saver: Further Evidence

Authors

  • EDWARD C. LAWRENCE,

  • GREGORY E. ELLIEHAUSEN

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    • Both of The Pennsylvania State University. The authors gratefully acknowledge the assistance and suggestions of Professor George C. Philippatos; the participants of the Finance Workshop at The Pennsylvania State University; and Professor Edward J. Kane.

ABSTRACT

This paper provides further evidence on the distributional impact of interest rate ceilings on the small saver. Cross-section data from the 1977 Consumer Credit Survey was used to estimate the implicit losses imposed on different income classes by government regulations. Our findings generally support earlier studies which found the implicit burden to be regressive among income classes. However, the degree of regressivity showed a marked decrease since 1970. These results may be explained by portfolio adjustments of households and financial innovations in response to deposit rate ceilings and accelerating inflation during the 1970s.

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