nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2020‒06‒15
three papers chosen by

  1. Confidence, financial literacy and investment in risky assets: Evidence from the Survey of Consumer Finances By Andrej Cupak; Pirmin Fessler; Joanne W. Hsu; Piotr R. Paradowski
  2. Patterns in demand side financial inclusion in India -- An inquiry using IHDS Panel Data By Vinay Reddy Venumuddala
  3. Financial Inclusion and Bank Stability: Evidence from Europe By Gamze Danisman; Amine Tarazi

  1. By: Andrej Cupak (National Bank of Slovakia); Pirmin Fessler; Joanne W. Hsu; Piotr R. Paradowski
    Abstract: We employ recent Survey of Consumer Finances (SCF) microdata from the US to analyze the impacts of confidence in one’s own financial knowledge, confidence in the economy, and objective financial literacy on investment in risky financial assets (equity and bonds) on both the extensive and intensive margins. Controlling for a rich set of covariates including risk aversion, we find that objective financial literacy is positively related to investment in risky assets as well as debt securities. Moreover, confidence in own financial skills additionally increases the probability of holding risky assets and bonds. While these relationships are rather robust for the extensive margin, they break down with regard to the conditional share of financial wealth in risky assets of those who actually hold them. The relevance of financial literacy as well as confidence varies considerably with the distribution of wealth as well as across several socio-economic dimensions such as age, education and race.
    Keywords: financial literacy, confidence, risky assets, household finance, survey data, US
    JEL: D12 D14 D31 D91 I20 G11
    Date: 2020–03
  2. By: Vinay Reddy Venumuddala
    Abstract: In the following study, we inquire into the financial inclusion from a demand side perspective. Utilizing IHDS round-1 (2004-05) and round-2 (2011-12), starting from a broad picture of demand side access to finance at the country level, we venture into analysing the patterns at state level, and then lastly at district level. Particularly at district level, we focus on agriculture households in rural areas to identify if there is a shift in the demand side financial access towards non-agriculture households in certain parts of the country. In order to do this, we use District level 'Basic Statistical Returns of Scheduled Commercial Banks' for the years 2004 and 2011, made available by RBI, to first construct supply side financial inclusion indices, and then infer about a relative shift in access to formal finance away from agriculture households, using a logistic regression framework.
    Date: 2020–05
  3. By: Gamze Danisman (Faculty of Management, Kadir Has University, Istanbul, Turkey); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)
    Abstract: The Great Recession of 2007-2009 piqued the interest of policymakers worldwide, prompting various initiatives to stabilize the financial system and advance financial inclusion. However, few studies have considered their interconnectedness or whether any synergies or trade-offs exist between them. This paper investigates how financial inclusion affects the stability of the European banking system. The findings indicate that advancements in financial inclusion through more account ownership and digital payments have a stabilizing effect on the banking industry. A deeper investigation shows that such a stabilizing impact is mainly driven by the targeting of disadvantaged adults who are young, undereducated, unemployed, and who live in rural areas. Hence, along with its known benefits to society as a whole, financial inclusion has the additional benefit of improving the stability of the financial system. Such findings call for policy configurations that are specifically designed to achieve financial inclusion for disadvantaged individuals.
    Keywords: Financial Inclusion,Bank Stability,Account Ownership,Digital Payments,Disadvantaged Adults
    Date: 2020–05–26

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