Brown Bag Seminar: Aleksandar Todorovic

"What leads people tolerate negative interest rates on savings?"

Using an online experiment, we examine to what extent people are ready to bear negative interest rates (NIR hereafter) on their savings. We find some tolerance to NIR, which strongly depends on the amount of savings, time horizon, individual savings behavior, and framing. The higher the amount, the lower the tolerance to NIR, which is consistent with a reverse magnitude effect. As time horizon increases, the tolerance to NIR decreases. Regular savers are more likely to tolerate NIR than nonregular savers, which is consistent with the status quo bias. We also find a higher tolerance to NIR on savings when participants are anchored towards NIR on savings first.