nep-fle New Economics Papers
on Financial Literacy and Education
Issue of 2020‒07‒13
three papers chosen by

  1. Culture and Adult Financial Literacy: Evidence from the United States By Davoli, Maddalena; Rodríguez-Planas, Núria
  2. Household Finance By Gomes, Francisco J; Haliassos, Michael; Ramadorai, Tarun
  3. The Outlook for the Economy and Federal Reserve Policy By Loretta J. Mester

  1. By: Davoli, Maddalena (Goethe University Frankfurt); Rodríguez-Planas, Núria (Queens College, CUNY)
    Abstract: Using a US nationally representative sample of over 6,000 adults from 26 countries of ancestry, we find a strong association between their financial literacy in the US and the financial literacy level in their self-reported country of ancestry. More specifically, if an individual from a country of ancestry with "average" financial literacy had instead come from a country with financial literacy one-standard deviation above the mean, his or her likelihood of answering correctly basic financial literacy questions regarding inflation, risk diversification, and interest rate in the US would have increased by 4 percentage points, a 9% increase relative to the average financial literacy in our sample of 43%. The cultural components behind this observed association include a strong emphasis on patience, long-term orientation and risk-aversion in the country of ancestry. We also find that the association is driven by financial literacy on risk diversification and interest compounding.
    Keywords: financial literacy, culture, epidemiological approach, economic decisions
    JEL: D14 E2 I22 Z10
    Date: 2020–06
  2. By: Gomes, Francisco J; Haliassos, Michael; Ramadorai, Tarun
    Abstract: Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on household finance (with some important exceptions) and suggest directions for future research. We begin with the theory and empirics of asset market participation and asset allocation over the lifecycle. We then discuss household choices in insurance markets, trading behavior, decisions on retirement saving, and financial choices by retirees. We survey research on liabilities, including mortgage choice, refinancing, and default, and household behavior in unsecured credit markets, including credit cards and payday lending. We then connect the household to its social environment, including peer effects, cultural and hereditary factors, intra-household financial decision making, financial literacy, cognition and educational interventions. We also discuss literature on the provision and consumption of financial advice.
    Keywords: household finance
    Date: 2020–03
  3. By: Loretta J. Mester
    Abstract: I have the pleasure of serving on the council’s board so I have seen firsthand the important work the council is doing to increase economic and financial literacy in the country. As the council’s mission statement explains, equipping students with this knowledge can help them make better decisions for themselves, their families, and their communities. It is noteworthy that despite the burdens of the pandemic, the council has found creative ways to carry on its mission, including its support of teachers, the National Economics Challenge, and this speakers’ series. Today, before we open it up to questions, I’ll give you an update on the economy and on the Federal Reserve’s policy response.
    Keywords: economic policy; economy
    Date: 2020–06–17

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.