nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2018‒08‒27
four papers chosen by
Viviana Di Giovinazzo
Università degli Studi di Milano-Bicocca

  1. Macro-Financial Linkages in Shallow Markets; Experience from the African Department’s Pilot Countries By International Monetary Fund
  2. TOWARD HIGHER FINANCIAL INCLUSION RATE: SERVICE QUALITY, COSTS OF ACCESS, AND AWARENESS By Chaikal Nuryakin; Prani Sastiono; Faradina Alifia Maizar; Pyan Amin; Nanda Puspita; Wahyu Pramono; Christine Tjen
  3. Financial literacy and socialist education: Lessons from the German reunification By Davoli, Maddalena; Hou, Jia
  4. Mortgage-rate pass-through in the presence of refinancing By David Berger; Fabrice Tourre; Konstantin Milbradt

  1. By: International Monetary Fund
    Abstract: This paper assesses and disseminates experiences and lessons from low-income countries (LICs) in Sub-Saharan Africa that were selected by the Africa Department in 2015-16 as pilots for enhanced analysis of macro-financial linkages in Article IV staff reports. The paper focuses on the common characteristics across the pilot countries and highlights the tools used in the analysis, the challenges encountered, and the solutions deployed in overcoming them.
    Keywords: Financial risk;Financial inclusion;Financial markets;Low income countries;Sub-Saharan Africa;Shallow Financial Markets; Risk; Financial Inclusion
    Date: 2018–07–23
  2. By: Chaikal Nuryakin (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia); Prani Sastiono (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia); Faradina Alifia Maizar (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia); Pyan Amin (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia); Nanda Puspita (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia); Wahyu Pramono (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia); Christine Tjen (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia)
    Abstract: The inclusion level of DFS and Laku Pandai (inclusion of access or use of services) have reached 28% and 43%. Nevertheless, when we define the inclusion by account ownership (inclusion of banking account), the inclusion rates drop to 5% and 25%. The lack of awareness of DFS and Laku Pandai is still considered as the major obstacle to broaden the access of financial services through agents. Laku Pandai appears more reliable in improving financial service access for the poor and people in remote areas as it may provide a more efficient access (in term of cost, distance, and time of transport) and perceived by users to provide better service quality than other formal financial services they have experienced thus far. On the other hand, DFS services seems to be more attractive toward more educated and higher income segment of society. Nevertheless, the cost of access of DFS is not much different from the cost of access of banks and other formal financial services while the quality is perceived to be less by its users. Furthermore, the efficiency of both DFS and Laku Pandai could be much improved since there is a significant overcharging in their service fees. On the account ownership, there is an indication that DFS is not a preferable financial access for people who are excluded from formal financial services while it is for Laku Pandai. The regression results also show that users of both DFS and Laku Pandai need time to open or to register an account, possibly due to time needed to build in trust in the agents. Another factor that is important in determining whether user is to open an account is the (perceived) cost. Therefore, the aforementioned service fee overcharging should be taken seriously to improve rate of opening or registering account.
    Keywords: LKD — Laku Pandai — Digital Inclusion
    JEL: G28 G21
    Date: 2018–07
  3. By: Davoli, Maddalena; Hou, Jia
    Abstract: A growing body of literature shows the importance of financial literacy in house-holds' financial decisions. However, fewer studies focus on understanding the determinants of financial literacy. Our paper fills this gap by analyzing a specific determinant, the educational system, to explain the heterogeneity in financial literacy scores across Germany. We suggest that the lower financial literacy observed in East Germany is partially caused by a different institutional framework experienced during the Cold War, more specifically, by the socialist educational system of the GDR which affected specific cohorts of individuals. By exploiting the unique set-up of the German reunification, we identify education as a channel through which institutions and financial literacy are related in the German context.
    Keywords: financial literacy determinants,socialist education,German reunification,DiD
    Date: 2018
  4. By: David Berger (Northwestern University); Fabrice Tourre (Northwestern University); Konstantin Milbradt (Northwestern University)
    Abstract: We present an analytically tractable model of the mortgage-rate pass through and the cross-section of coupon rates in the economy. Competitive banks offer downward adjustable fixed-rate risk-free mortgages (“refinancing”) with current mortgage rate m(r) where r is the prevailing short-rate the bank uses to finance the mortgage. We present two versions: (1) Rational attentive investors facing small adjustment cost refinance as soon as the current mortgage rate is below their individual mortgage rate; (2) rational inattentive consumers facing small adjustment cost refinance as soon as they become aware of the current mortgage rate being below their individual mortgage rate. We analytically derive m(r) for general processes and the ergodic distribution of mortgage rates in the economy. The mortgage rate function m(r) is increasing and additionally concave. Thus, monetary policy has a differential impact on the housing market depending on the level of the interest rate r. Further, the mortgage pass-through is affected by default risk, financial literacy, and the competitiveness of the banking industry.
    Date: 2018

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