Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/210286 
Authors: 
Year of Publication: 
2013
Series/Report no.: 
Staff Memo No. 15/2013
Publisher: 
Norges Bank, Oslo
Abstract: 
This note aims to shed light on the relationship between interest rates and household savings in Norway. To this end, I use a simple life-cycle model that accounts for actual debt levels of Norwegian households. The starting point is that since Norwegian households tend to have negative net financial wealth, a low interest rate makes them better off. In a nutshell, reduced interest rate payments can be viewed as a transitory income increase. When households wish to smooth consumption, only a small fraction of the transitory income gift will be consumed, while most of the reduced income payments will be saved for consumption in future periods. Hence, a life-cycle model is able to explain why households increase savings when interest rates are low.
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-767-4
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Research Report
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