The Effects of Inflation on Rural Savings: Case Study of Kohgilooyeh and Boyer Ahmad Province

Regarding importance of the effects of increase in prices of goods and services on rural savings, in this paper, these effects have been studied using linear expenditure system. The data was collected from rural familie's expenditure survey in Kohgilooyeh and Boyer Ahmad Province. Findings of the study showed that the marginal propensity to save was 0.17 and marginal propensity to consume was 0.83. The highest marginal propensity to consume was related to dairy products and the least one was related to fruit and vegetable group. Income elasticity of various goods and service showed that food products except beverages, processed food and tobacco products were among basic necessities and housing, clothing, furniture, services were considered luxury goods. The results showed that price elasticity of savings was -2.43 and one percent increase in prices of goods and services caused savings to decrease by 2.43 percent. In comparison, increase in prices of flour, grains and its related products, meat, milk and eggs, oil and fat groups had the most negative effects on rural savings