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on Financial Literacy and Education |
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Issue of 2024‒06‒17
twelve papers chosen by |
| By: | Maddalena Davoli; Uschi Backes-Gellner |
| Abstract: | We analyse financial literacy in Switzerland and its relationship with various economic outcomes using novel survey data collected in 2023. While the overall financial literacy levels are high in an international comparison, with over 50% of the respondents correctly answering the Big Three financial literacy questions about interest, inflation and risk diversification, there is significant heterogeneity within the population. Women, the young, the less educated and French and Italian-speaking respondents exhibit particularly low financial literacy. Women have lower financial literacy than men. The young have lower financial literacy than respondents in their working age, and Italian-speaking respondents exhibit particularly low financial literacy as compared to French- or German-speaking respondents. Financial literacy is also correlated with higher educational levels. We also find that financial literacy is positively linked to respondents' ability to cope with adverse economic outcomes: more financially literate individuals are better able to manage their expenses, save, and face economic shocks. |
| Keywords: | inancial literacy, personal finance, financial fragility, Switzerland |
| JEL: | G53 D1 I3 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:iso:educat:0220&r= |
| By: | Kaiser, Tim (University of Kaiserslautern); Lusardi, Annamaria (Stanford University) |
| Abstract: | This article provides a concise narrative overview of the rapidly growing empirical literature on financial literacy and financial education. We first discuss stylized facts on the demographic correlates of financial literacy. We next cover the evidence on the effects of financial literacy on financial behaviors and outcomes. Finally, we review the evidence on the causal effects of financial education programs focusing on randomized controlled trial evaluations. The article concludes with perspectives on future research priorities for both financial literacy and financial education. |
| Keywords: | financial education, financial literacy, financial behavior |
| JEL: | G53 D14 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16926&r= |
| By: | Javier Martínez Morales (Universidad Autónoma de Chihuahua) |
| Abstract: | This presentation aims to calculate and discuss the decomposition of the financial literacy index as an alternative to estimate the probabilities of low and high financial literacy among household members in Mexico, based on their sociodemographic and personal finance characteristics. The construction of the index was based on the manual for measuring education and financial inclusion proposed by the OECD/INFE and 14 questions from the ENIF (National Survey of Financial Inclusion), while specific Stata commands were used to calculate the decomposition. To estimate high and low probabilities, an ordered multinomial probit probabilistic model was generated. The data were obtained from the four microdata sources of the 2021 National Survey of Financial Inclusion (ENIF), published by INEGI (National Institute of Statistics and Geography). The results confirm that the inequality in financial literacy is a consequence of a social structure problem, which contributes to new empirical evidence. Finally, exercises of this nature, using Stata, allow for the argumentation of new ways to create and evaluate more efficient variables for econometric model estimation. |
| URL: | http://d.repec.org/n?u=RePEc:boc:mexi23:07&r= |
| By: | Gen Norman Thomas; Siti Mutiara Ramadhanti Nur; Lely Indriaty |
| Abstract: | This study aims to analyze the impact of financial literacy, social capital and financial technology on financial inclusion. The research method used a quantitative research method, in which questionnaires were distributed to 100 active students in the economics faculty at 7 private colleges in Tangerang, Indonesia. Based on the results of data processing using SPSS version 23, it results that financial literacy, social capital and financial technology partially have a positive and significant influence on financial inclusion. The results of this study provide input that financial literacy needs to be increased because it is not yet equivalent to financial inclusion, and reducing the gap between financial literacy and financial inclusion is only 2.74%. Another benefit of this research is to give an understanding to students that students should be independent actors or users of financial technology products and that students should become pioneers in delivering financial knowledge, financial behavior and financial attitudes to the wider community. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.06570&r= |
| By: | Yi Jiang; Shohei Shimizu |
| Abstract: | By employing causal discovery method, the Fast Causal Inference (FCI) model to analyze data from the 2022 "Financial Literacy Survey, " we explore the causal relationships between financial literacy and financial activities, specifically investment participation and retirement planning. Our findings indicate that increasing financial literacy may not directly boost engagement in financial investments or retirement planning in Japan, which underscores the necessity for alternative strategies to motivate financial activities among Japanese households. This research offers valuable insights for policymakers focused on improving financial well-being by advancing the use of causal discovery algorithms in understanding financial behaviors. |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2405.01078&r= |
| By: | Samuel Fiifi Eshun (Institute of Economic Studies, Charles University, Prague, Czech Republic); Evzen Kocenda (Institute of Economic Studies, Charles University, Prague, Czech Republic; CESifo, Munich, Germany; IOS, Regensburg, Germany; Department of Banking and Insurance, Faculty of Finance and Accounting; Institute of Information Theory and Automation of the CAS, Prague; the Euro Area Business Cycle Network) |
| Abstract: | This study explores the dynamic relationship between financial inclusion and green sustainability across 38 African countries. We constructed an environmental pollution index and a financial inclusion index covering the period 2000-2021 to account for the several dimensions within both indicators and employed them in the System GMM approach. We also tested for intra-regional heterogeneity in Africa. Our empirical results show that financial inclusion, while economically beneficial, poses a significant risk of environmental degradation and has a distinctive inverted U-shaped relationship. A direct link between increases in financial inclusion and pollution alters at a turning point, beyond which further increments in financial inclusion enhance green sustainability. The same pattern is observed for aggregate output. The results hold even when we control for a score of macro-level determinants. Our findings indicate the existence of an intra-regional heterogeneity in that Southern and Western African states exhibit a more significant negative impact on environmental pollution than Eastern Africa. These results remain robust for alternative proxies of green sustainability. We offer valuable insights for policymakers to promote sustainability through inclusive financial practices and policies in Sub-Saharan Africa. |
| Keywords: | Environmental Pollution Index, Financial Inclusion Index, Green Sustainability, Sub-Saharan Africa (SSA), System Generalized Methods of Moments (GMM) |
| JEL: | C23 E44 F64 K32 O55 Q43 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2024_23&r= |
| By: | Han, Seoni (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Yejin (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Park, Kyu Tae (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Jeong, Minji (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | 본 연구에서는 디지털금융이 아프리카의 금융포용성 개선에 중요한 역할을 하고 있다는 점에 주목하여 아프리카의 디지털금융과 금융포용성에 대한 종합적인 분석을 수행하였다. 코로나19 팬데믹을 전후로 최근 아프리카 지역의 금융포용성 및 디지털금융 관련 현황과 정책을 파악하고, 디지털금융을 통한 금융접근성 개선이 가져오는 사회경제적 영향을 분석하며, 주요국과 한국의 대아프리카 금융 및 디지털금융 분야 협력 현황을 검토하였다. 연구 결과를 토대로 한국과 아프리카 간 금융 및 디지털금융과 관련한 세부적인 협력 방안을 제안한다. This study provides a comprehensive analysis of the digital finance and its impacts on financial inclusion in Africa. While the development of the financial sector is crucial for long-term economic growth, traditional financial industry growth in Africa has been insufficient. Nevertheless, notable progress has been made in enhancing financial inclusion in alignment with Sustainable Development Goal 8, particularly since the introduction of mobile money services in Kenya in 2007. Mobile money services have emerged as a lifeline, allowing the previously unbanked to have access to affordable and secure financial services in Africa. The adoption of mobile-based financial services has rapidly expanded, with 154 out of 315 global mobile money services available in sub-Saharan Africa as of 2022. This widespread adoption has significantly reduced the proportion of financially excluded populations across Africa. However, despite these achievements, the adult account ownership rate in sub-Saharan Africa averaged only 55% in 2021. With the exception of South Africa, which has a well-established traditional financial industry, and Kenya, which has made remarkable progress in embracing mobile money, there is still ample room for improving financial inclusion throughout the African continent. The COVID-19 pandemic accelerated the shift in the financial industry, with a surge in online payments and increased fintech activities. Lockdowns led to higher demand for contactless services, while African governments’ policies to boost non-face-to-face financial services further stimulated the use of mobile money services. Many African countries are now pursuing digital transformation strategies tailored to their needs, focusing on e-government services, digital infrastructure, and electronic payment systems. Additionally, many African countries are formulating national strategies to enhance financial inclusion by integrating low-income and marginalized populations into the financial sector.(the rest omitted) |
| Keywords: | 2024 US presidential election; US tariff policy; universal tariff; reciprocal tariff; economic impact |
| Date: | 2023–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2023_004&r= |
| By: | Carolina Guerini; Donato Masciandaro; Alessia Papini |
| Abstract: | Financial education can influence the level of financial literacy. In many countries public authorities implement financial education policy by means of ex ante certification of both private and public providers of education activities. This article uses political economy, educational marketing and text analysis as complementary tools to offer a positive analysis of such setting. Being financial education a credence good and given the key assumption that financial literacy is a country state–contingent endowment that deteriorates, as a consequence of innovation, the third-party certification can be considered as a strategic governance solution. Yet, when a public agency acts as third-party certifier, political and bureaucratic incentives shape its action. In particular, political activism in financial education can be motivated by financial instability worries. Such theoretical relationship is empirically confirmed applying text analyses, and using financial education narrative as a proxy for activism both for the politicians of the European Parliament and the bureaucrats of the ECB in the period 1997-2024. |
| Keywords: | financial education, financial literacy, trust, financial instability, education marketing, educational needs’ elicitation, quality disclosure, conflict of interest, third-party certification, political capture, text analysis, European Parliament, ECB |
| JEL: | D72 G28 G53 L15 M3 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp24223&r= |
| By: | Bertoletti, Lucía; Borraz, Fernando; Sanroman, Graciela |
| Abstract: | This paper examines the disparity in default risk between vulnerable and non-vulnerable populations in consumer lending. We merge an exhaustive registry of loans granted in the financial system with microdata on vulnerable individuals applying for social programs. We estimate the sources of this disparity and how loan and individual characteristics influence the probability of default. We find that vulnerable individuals have a higher risk than non-vulnerable individuals. However, this difference is reduced when individual debt characteristics, particularly the interest rate, are considered. Specifically, interest rates explain at least 30 percent of the risk gap. We also find that the default probabilities faced by lending firms are higher than those faced by banks, but we show that this effect is partly due to interest rate divergences. Our study underscores the importance of considering individual characteristics, loan characteristics, and interest rates when assessing default risk. While recognizing their limitations, these results suggest the need for policy interventions to promote financial inclusion, fair interest rate practices, and financial education, especially for vulnerable populations. |
| Keywords: | consumer lending, default, interest rate, poverty |
| JEL: | G21 G23 G51 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1439&r= |
| By: | Montagnoli, Alberto (University of Sheffield); Taylor, Karl (University of Sheffield) |
| Abstract: | The aim of this paper is twofold. Firstly, we investigate the determinants of individual's attitudes towards investing responsibly, based upon Environmental, Social, and Governance (ESG) considerations. Secondly, we look at how important ESG considerations are, over and above socio-economic characteristics including financial literacy and risk attitudes, in explaining whether individuals hold shares and/or equity, and the amount invested in financial assets. Using the UK Financial Lives Survey data which is collected by the Financial Conduct Authority, our analysis reveals that, firstly, individual characteristics have little explanatory power in terms of explaining responsible investments, except for: education; gender; age; and financial literacy. Secondly, those individuals who are interested in future responsible investments are approximately 7 percentage points more likely to hold shares/equity, and have around 77% more money invested in financial assets (i.e. just under twice the amount). We also undertake several sensitivity checks including the role of selection on unobservables and the extent to which the exogeneity assumption regarding interest in future responsible investments can be relaxed, as well as matching estimation techniques to move beyond mere statistical associations. |
| Keywords: | ESG attitudes, financial literacy, portfolio investment |
| JEL: | D81 G11 D14 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16952&r= |
| By: | Jonathan Reuter; Antoinette Schoar |
| Abstract: | In this review, we argue that access to financial advice and the quality of this advice is shaped by a broad array of demand-side and supply-side constraints. While the literature has predominantly focused on conflicts of interest between advisors and clients, we highlight that the transaction costs of providing advice, mistaken beliefs on the demand side or supply side, and other factors can have equally detrimental effects on the quality and access to advice. Moreover, these factors affect how researchers should assess the impact of financial advice across heterogeneous groups of households. While households with low levels of financial literacy are more likely to benefit from advice—potentially including conflicted advice—they are also the least likely to detect misconduct, and perhaps the least likely to understand the value of paying for advice. Regulators should consider not only how regulation changes the quality of advice, but also the fraction of households who are able to receive it and how different groups would have invested without any advice. Financial innovation has the potential to provide customized advice at low cost, but also to embed conflicts of interest in algorithms that are opaque to households and regulators. |
| JEL: | G11 G4 G5 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32452&r= |
| By: | C S Mohapatra (National Council of Applied Economic Research); Depannita Ghosh (National Council of Applied Economic Research) |
| Abstract: | With the advent of digitalisation and expansion of the retail market in recent years, India has experienced a significant shift in its financial landscape, necessitating an increased emphasis on investor education and protection. This paper delves into the intricate relationship between investor education and investor protection, emphasising the pivotal role of the Government, regulators and financial institutions in framing protective measures for investors. With the rise of digitalisation, particularly fintech, the financial services sector has witnessed transformative changes, influencing access to investment opportunities. This exploratory article reviews the existing architecture for investor protection and stresses the need for a dynamic and well-coordinated approach, robust complaint resolution mechanism, and comprehensive research to enhance investor protection in this evolving financial ecosystem. It discusses notable initiatives, including the National Strategy on Financial Education (NSFE) and its 5C strategy, suggesting an additional “6th C†i.e. a class-oriented approach to serve as a key driver in creating a financially aware and empowered India. The strengthening of the regulatory framework with adequate cybersecurity measures, launch of an online portal for claim settlement, and the establishment of a Centralised Grievance Redressal system are highlighted as crucial steps in building a comprehensive investor protection framework. The authors also highlight that investor protection is a two-way approach involving the Government and regulatory bodies on the one hand and investors on the other, with both sides being equally accountable, alert, and watchful in the digital era. |
| Keywords: | Investor Protection, Investor Education, Digitalisation, Ombudsman, Grievance redressal, SEBI, RBI, DPDP Act, Financial Literacy, Financial Inclusion |
| Date: | 2024–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:nca:ncaerw:165&r= |