ABSTRACT
While non-optimizing models have their shortcomings, in our case the model has nevertheless helped us to address a number of issues currently prevalent in the literature on the effects of financial deregulation, in particular the deregulation of interest rates. Furthermore, it has allowed us to address these questions in an integrated framework. One of the more interesting implications of the analysis is the importance of using the integrated approach to portfolio selection and the consumption-saving decision. Regardless of the lack of the empirical strength of the relationship between savings and interest rates so often claimed as the grounds for treating the two decisions as being independent, our results clearly show that the implications of ignoring such simultaneous determination does great violence to the outcomes of the effects of interest rates effects.
