Tax measures and household financial behaviour: Evidence from France

The aim of the paper was to examine how tax measures on financial assets have affected the investment behaviour of French households. Using an ARDL approach, we estimated the financial behaviour and effect of tax measures for each financial asset. We found that investment behaviour varies according to the considered financial asset. For almost all financial assets, income has a positive influence on the invested amount, and inflation has a negative influence. Nevertheless, we found that previous financial wealth has a significant positive impact only on long term investment. The real interest rate has different impacts on the invested amount according to the individual financial asset. Our results indicate that tax measures have a significant impact on investment behaviour. In particular, we found a spillover effect from tax measures and an asymmetric behaviour. These findings confirm that households have non-standard preferences, since the results could be explained by a liquidity preference and a loss aversion effect. The results have implications for asset managers and policymakers.