An Allocation Analysis of Polish Household Savings Invested in Financial Assets, 2003-2014

This article addresses the allocation of Polish household savings that are invested in financial assets. As an economic category, these savings are very important in every country because they determine investments in the national economy, thereby influencing a country’s further economic growth and development. From this point of view, investigating both the allocation of personal savings and their structure is essential because they change due to changing economic circumstances, changing situations in the world’s financial markets, especially in the stock exchange markets, and the development of financial markets. The main purpose of this article is to analyze the changes in the allocation of savings in Polish households and the structure of their investment in financial assets. These changes, which are empirically observed, result from the circumstances of the national economy, which affect the behavior of investors in the stock market and determine the interest rate levels. The analysis is conducted on the basis of trend models with variations of parameters. The analysis has been carried out for the period Q4 2003 – Q3 2014.


Introduction
The savings of households are a very important economic category in any economy and influence its development. The allocation of these savings is particularly essential, thus making it the subject matter of this paper. Personal savings have a direct impact on economic investment. The allocation of these savings attests to the inflow of capital to those sectors (branches) of the economy that, based on the savings investor's evaluation, are capable of showing the highest rates of return on the investment, i.e., they are the most profitable. Such sectors are frequently also the most innovative of the economy and, in turn, exert the most profound influence on economic growth, thus also determining its development. The allocation and de facto investment of household savings in the economy may occur through the banking sector (indirect investment) or the financial market (direct investment). In Poland, the overwhelming majority ings. Numerous factors determine the allocation of household savings and its structure; however, first and foremost, they are contingent upon economic and demographic factors and on the psychological attributes of an investor, though we do not examine the latter two factors. Among the economic factors, those that directly shape the economy are the most important because they also influence the stock market and interest rate levels (although the basic interest rate is set by the central bank of Poland, its level is largely dependent on economic circumstances).
The chief purpose of this paper is to analyze the allocation of personal savings to financial assets in Poland and the changes to the structure of this allocation. The analysis was based on quarterly financial accounts that were drafted by the National Bank of Poland in the period 2003Q4-2014Q3. The analysis assumed a macroeconomic perspective, which is econometric in character, and was conducted based on a trend model with a variety of parameters, which were estimated using the ordinary least squares (OLS) method. The analyzed period encompassed times of prosperity and economic slowdown, the latter of which was caused by the financial crisis starting in 2007, as well as the period of recovery from this crisis. During this period, changes in the country's economic circumstances led primarily to changes in the stock market and interest rates, which exerted a direct influence on the structure of the allocation of household savings invested in financial assets. Using sample cases, the main objective of this study is to determine the extent of those changes. The intention is to determine the extent of the decreasing proportion of household savings being allocated to bank depos-its and debt securities, the extent of the simultaneous growth of the proportion of these savings being allocated to shares and mutual funds, and vice versa. The present study is a continuation of research initiated by Dębski (2009) and Dębski and Świderski (2011).

Household savingsmethodological aspects
In macroeconomics, household savings are defined as the difference between a household's available personal income and its expenditure on ongoing consumption.
These are the ongoing savings of the population, which represent an increase in the total personal savings in a given year and are a resource because they are the sum of both the ongoing savings and the aggregated savings from the past. The total household savings may be composed of tangible assets in which the household has invested, such as real estate, art, gold, and jewelry, and the household's financial assets, such as cash, bank deposits, securities, and shares in mutual funds. This paper analyzes the structure of the allocation of household savings in financial assets and the changes to this structure by examining the financial market's approach to allocating these savings and the corresponding changes to the approach. Over time, the structure of allocation undergoes changes that are due to not only the changing circumstances of the market but also the use of personal savings as a resource. In a given period (a quarter or a year), a change may occur in the consequences of withdrawing part of one's savings from the financial market and allocating them to purchase tangible assets, or vice versa. In a given period, a household's total savings may also become smaller if they are withdrawn from investment and devoted to ongoing consumption.
The theory of economics that is supported by numerous empirical studies argues that the fundamental factor determining the amount of a household's ongoing savings is the household's propensity to save, which An Allocation Analysis of Polish Household Savings Invested in Financial Assets, 2003-2014 is most frequently seen as the ratio of these savings in a given year to the disposable income, a measure that is also referred to as the savings rate. An individual's (household) propensity to save results predominantly from the willingness to defer current consumption until a later date. The relevant economic literature pays particular attention to the motives behind saving that inspire an individual, their psychological traits that encourage saving, or demographic factors. Although this paper does not address the microeconomic perspective, we cite examples of the following relevant papers: (Anioła & Gołaś, 2012b;Börsch-Supan, 2003;Brandstaetter & Gueth, 2000;Canova, Rattazzi, & Webley, 2005;Duesenbury, 1952;Fisher & Montalto, 2010;Kirsanova & Sefton, 2007).
Many researchers have examined the propensity to save from a macroeconomic perspective by looking at the entire population (all households). These studies were dependent on manifold factors, entertained by various theories on saving. An overall review may of the research has been provided by Rytelewska (2008) and Beverly and Sherraden (1999), among others. The theories clearly indicate that the basic factor determining an increase in ongoing savings, which is a direct consequence of a household's propensity to save, is the population's personal disposable income (as already noted by J. Keynes (1985, p. 122)), which is directly expressed in the yearly national income. The personal disposable incomes of the population is equal to the personal incomes minus taxes paid (see Carroll, 2001).
Regarding theories about savings that measure the dependence of personal savings on personal incomes, the most prominent ones are the income theory by Keynes (1985), the life-cycle hypothesis by Modigliani (Modigliani & Brumberg, 1955), and the permanent income hypothesis by Friedman (1957). Countless economists have conducted research in this regard, including (Bunting, 2009;Han & Sherraden, 2009;Liberda, 2000;Sherraden, Schreiner, & Beverly, 2003).
Interest rates are another important factor that influences the increase in household savings. In models accounting for personal savings, the interest rate is typically expressed as the real interest rate of bank deposits, which can be seen in models of the national economy (Welfe, 2013) or in models of the national economy's financial sector (Dębski, 1990;Łapińska-Sobczak, 1997). When this rate increases, more funds are placed in various types of bank accounts, and fewer funds are allocated to the financial market's equity instruments, such as shares of companies or mutual funds. In turn, a decrease in this rate causes a reverse effect, i.e., a decrease in the proportion of savings placed in banks and an increase in the proportion of savings allocated to shares and investment funds.
Moreover, the precautionary motive should be mentioned as one of the factors that stimulates an increase in household savings, as already noticed by Keynes (1985). The consequence of this motive is intentional saving, whether for the purpose of buying a house or apartment, securing retirement funds, educating children, or otherwise, as well as cashless transactions that directly influence the amount of funds that the population holds in its bank accounts. An additional factor stimulating household savings is the monetary policy of the central bank. An expansionary program that leads to the intensification of commercial bank lending will result in greater investments, which will result in an increase in personal incomes and household savings. In turn, if the central bank pursues a restrictive policy, the results will be inverse.
In Poland, the savings rate in the period under examination ranged between 7.7% (2003) and 10.0% (2007) and started to fall gradually, reaching 6.4% in 2008, 6.3% in 2010, and 3.7% in 2013. As research shows (Anioła, Gołaś, 2012a, p. 27;Rytelewska, 2008, p. 417), the rate in the period 2003-2007 was higher than those of the United States, Great Britain, Canada, and many other countries; however, countries such as Germany, France, and Italy had an interest rate higher than Poland's. Beginning in 2008, the savings rate in Poland began to decline. In the countries belonging to the Euro Area, the rate was higher in the whole period under analysis, at approximately 14%.
There is no doubt that in any country whose chief function is to mobilize capital, the development of the financial market contributes to an increase in personal savings and to changes in the structure of their allocation. Greater savings leads to economic growth, which leads to an increase in savings by contributing to an increase in people's personal incomes (feedback in the economy). Over the past 25 years, following the country's political transformation, the development of Poland's financial market has been accompanied by significant changes to the structure of household savings. As demonstrated by Dębski (2009), the proportion of personal savings that is allocated to the banking sector has gradually declined during this period, and the proportion of these savings that is allocated through the financial market has risen. This shift occurred as a result of a structural transformation of the Polish economy, which led to the establishment of a stock exchange, as well as mutual funds, such as investment, pension and capital funds that are managed by life insurance undertakings. Considerable development of these practices has undoubtedly contributed to a substantial increase in long-term savings of households in Poland.

Household savings in Poland and their allocation to financial assets between 2003 and 2014
Household savings, apart from the money intended for the purchase of various tangible assets, may be allocated to a diverse range of financial assets. This article analyzes the structure of those assets, which might be bank deposits, various types of securities or equity interests, and/or investments made through a mutual funds agency. Table 1   Thus, the increase is twofold and very significant.
Considering the increase in prices (the CPI index) in this period, which amounted to 12.5%, an actual increase of 86.6% was achieved. In turn, as a proportion of the GDP, the financial assets held by the population grew by over 20 percentage points (pp.).
Such a substantial increase in the value of household savings that were allocated to financial assets was a consequence of that period's prosperous economic  Taking into account the structure of household savings allocated to financial assets, which is presented in table 2, one may note that the biggest component   The means of allocation of personal savings to financial assets discussed so far may be jointly referred to as a direct investment, i.e., it is made single-handedly by a household. The funds invested in such a way represented a proportion of the total savings allocated to financial assets during the study period, ranging from slightly more than 62% at the end of 2003, to approximately 47% in the first quarter of 2009, and then to 58% at the end of the third quarter of 2014, which indicates that the investment amount followed first a downward and then an upward trend. If the proportion of personal savings held in cash, which was quite stable during the study period because it oscillated approximately 10% (one exception is the period 2007Q1-2008Q1, when it was approximately 8%) is added to that, it may be stated that the remaining portion of the savings was allocated in an indirect manner, i.e., through capital, pension, and investment funds -mutual funds.
The household savings that were allocated to investment funds as a proportion of the total financial as-

Analysis of changes to the structure of savings allocated to financial assets
The changes made to the structure of savings allocated  In contrast, the proportion of funds allocated to pension entitlements in the period under examination behaved differently from the proportions of household savings allocated to financial assets discussed above.

Conclusion
This examination has demonstrated that as the financial market and economic circumstances developed in Poland, the structure of allocation of household savings to financial assets underwent quite significant changes between 2003 and 2014. The analysis revealed that changes to this structure had a relatively strong dependency on the current market circumstances.
The study showed that along with the improvement of the economic condition in Poland, which led, among other things, to an increase in the stock market share prices and a decrease in interest rates, the proportion of personal savings allocated to shares quoted on an organized market and mutual funds increased, and the proportion of savings allocated to deposits and debt securities decreased. However, in adverse economic circumstances that led to a bear market and an increase in interest rates, the proportions discussed above displayed contrasting behavior. Thus, the structure of the allocation of household savings to financial assets in the period under examination underwent changes. In Poland, such a change occurred with the commencement of the global financial crisis in 2007-2008. Empirical research has shown the depth of those changes in regards to the particular components of household savings that are allocated to financial assets.