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on Financial Literacy and Education |
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Issue of 2025–11–24
seven papers chosen by Viviana Di Giovinazzo, Università degli Studi di Milano-Bicocca |
| By: | Yidi Wang; Zhen Wang; Zan Yang |
| Abstract: | This study investigates the impact of flood risks on household financial decisions, with a focus on the default and repayment behavior and analyzes how their unrealistic optimism regarding Loan Prime Rate (LPR) transfer decisions affect credit loss during flood hazards. Through empirical analysis of loan data in China, we find that rural households who choose to switch to LPR are more likely to default after a flood, suggesting that these households are overly optimistic about their financial situations and underestimate the financial risks posed by floods. Additionally, the study finds that defaulted households adjust their financial expectations and exhibit more proactive repayment behaviors after the flood, highlighting that financial behavior is not static but adjusts based on real experiences such as the challenges posed by floods. Female and younger clients are more prone to defaults due to proactive risk-taking influenced by optimism, yet demonstrate improved repayment behaviors post-default, reflecting recalibrated financial strategies. The findings underscore the critical role of financial literacy and behavioral biases in mediating climate-related financial vulnerabilities. This study contributes to behavioral economics by linking environmental shocks to household financial resilience, emphasizing the need for targeted interventions to mitigate optimism-driven risks in vulnerable populations. |
| Keywords: | flood risk; Mortgage Default; mortgage repayment; unrealistic optimism |
| JEL: | R3 |
| Date: | 2025–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2025_248 |
| By: | Chauhan, Tarana |
| Abstract: | Bank accounts are an essential first step towards formal savings and credit in most countries, yet their impact on women's control over resources remains underexplored. I investigate the effects of 2014 policy in India that provided free bank accounts and led to an unprecedented increase in women's account ownership. This paper shows that bank account ownership improves households' financial access, and in certain cases increases women's decision making on household spending. Using a difference-in-difference estimation that exploits the sharp timing of the policy and a high-frequency household panel data, I find that women's account ownership increased household's likelihood to save in formal instruments and switch to formal sources of borrowing but did not affect consumption patterns consistent with women's preferences. Exploiting regional variation in pre-policy bank infrastructure, I further analyze the effects on women's self-reported decision-making. While districts with faster account expansion did not exhibit overall improvement of women's participation in household purchase decisions or spending autonomy, there were significant gains in districts where women had greater ex-ante mobility and households trusted banking institutions. |
| Keywords: | Bank Account Ownership, Household Resource Allocation, Women's Decision Making, Government Policy, Women's Empowerment, India |
| JEL: | D13 D14 G21 G28 G51 I38 J12 J16 R28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1689 |
| By: | Jose, Anu (Central Bank of Ireland); Kelly, Jane (Central Bank of Ireland) |
| Abstract: | As flexible, short-term, often interest-free Buy Now Pay Later (BNPL) products become increasingly popular, this Insight reveals that individuals displaying certain characteristics of financial vulnerability are using BNPL to a greater extent, more frequently and simultaneously across multiple providers. These characteristics include a history of being refused credit elsewhere, being late on loan repayments previously, exhibiting low financial literacy, and overconfidence. While BNPL may be a convenient and affordable method to pay for products, our analysis highlights that it is being disproportionately used by those least equipped to manage the risks, raising concerns about debt accumulation. This underlines the importance of clear disclosures designed with behavioural insights in mind and the implementation of credit checks by providers that take into account total financial commitments by prospective borrowers. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:7/si/25 |
| By: | Jannik Schumann (University of Finance and Administration (V?FS)) |
| Abstract: | This paper examines how rising inflation affected household saving behavior in Germany between 2015 and 2022. Using longitudinal microdata from the Socio-Economic Panel (SOEP) and a two-way fixed-effects design, we estimate the impact of monthly year-over-year inflation on different types of saving rates?retirement-specific, wealth-building, and overall savings?while controlling for household heterogeneity and common macro shocks. The results indicate that moderate inflation fluctuations before 2020 had negligible effects on savings. During the 2021?22 inflation surge, however, saving rates declined as households used savings to buffer higher living costs. Heterogeneity is notable: younger households slightly increased retirement contributions when inflation rose, whereas older households showed no adjustment. No significant effect was found for wealth-building savings. Regional analysis reveals that the modest positive response among young households was driven by West Germans, while East German households?facing lower incomes?experienced a sharper decline in overall saving. These findings highlight that inflation primarily erodes saving capacity rather than triggering major portfolio shifts. Policy implications include strengthening financial literacy, ensuring adequate pension indexation, and targeting relief to vulnerable groups, particularly in East Germany, to prevent long-term financial insecurity. |
| Keywords: | Inflation; Young adults; Household finance; Saving behavior; Retirement saving; Wealth accumulation; Panel data; Germany; SOEP |
| JEL: | E31 D14 E21 |
| URL: | https://d.repec.org/n?u=RePEc:sek:iacpro:15116506 |
| By: | Liezel Alsemgeest (University of the Free State) |
| Abstract: | The rise of social media as a platform for personal finance discussions has transformed how individuals access, share, and engage with financial knowledge. This shift is particularly evident on X (Twitter), where users increasingly turn to microblogs for advice and discussions on saving, cryptocurrency, investing, and managing debt. Despite the growing influence of these platforms, there remains a significant gap in understanding the thematic structure and emotional tone of personal finance conversations online. This study addresses this gap by analysing 37, 466 personal finance-related posts from X, offering insights into the key topics and sentiment patterns of finance-related micro-blogs.Building on methodological frameworks from recent machine learning research, Latent Dirichlet Allocation (LDA) topic modelling, augmented by VADER sentiment analysis were implemented to address the core research question: What dominant themes emerge in crowdsourced financial conversations?The analysis identified five dominant themes: cryptocurrency speculation (35.66% prevalence), debt management (15.84%), budgeting (20.63%), making money online (17.38%), and better money spending (10.49%).This research underscores the need for interdisciplinary studies that bridge personal finance, behavioural economics, and digital communication to better understand how social media influences financial decision-making. The findings have practical implications for policymakers, educators, and financial institutions aiming to enhance financial literacy, while also addressing risks associated with unverified advice and promotional content lacking proper disclosure. By mapping the thematic and emotional landscape of personal finance discourse on X, this study provides a foundation for future research into the evolving role of social media in shaping consumer financial behaviour.The growing reliance on social media for financial guidance necessitates further exploration into its impact on individual decision-making processes and broader market behaviours. This study contributes to this emerging field by offering a replicable framework for analysing large-scale social media datasets, highlighting opportunities for improving financial literacy and risks that demand regulatory attention. |
| Keywords: | Topic modelling, X, personal finance, social media, micro-blogs |
| JEL: | D14 A20 G02 |
| URL: | https://d.repec.org/n?u=RePEc:sek:iacpro:15616667 |
| By: | Lorenzo Carta; Fernando Spadea; Oshani Seneviratne |
| Abstract: | We present the first application of federated learning (FL) to the U.S. National Financial Capability Study, introducing an interpretable framework for predicting consumer financial distress across all 50 states and the District of Columbia without centralizing sensitive data. Our cross-silo FL setup treats each state as a distinct data silo, simulating real-world governance in nationwide financial systems. Unlike prior work, our approach integrates two complementary explainable AI techniques to identify both global (nationwide) and local (state-specific) predictors of financial hardship, such as contact from debt collection agencies. We develop a machine learning model specifically suited for highly categorical, imbalanced survey data. This work delivers a scalable, regulation-compliant blueprint for early warning systems in finance, demonstrating how FL can power socially responsible AI applications in consumer credit risk and financial inclusion. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.08588 |
| By: | Marie-Claire Broekhoff; Carin van der Cruijsen |
| Abstract: | The banking sector is undergoing a rapid transformation due to the digitalisation of financial services, which has led to the widespread closure of bank branches. This study examines the relation between the presence of bank branches in the Netherlands and consumer trust in the payment system. Such trust is essential for the smooth functioning of the payment system. Using regional data from the Dutch Chamber of Commerce on bank branch locations and a consumer survey from De Nederlandsche Bank and the Dutch Payment Association, we estimate fixed effects models to assess how branch closures affect trust in the payment system in general (broad-scope trust) and trust in payment services offered by consumers’ own bank (narrow-scope trust). The results indicate the presence of bank branches is positively associated with both trust measures, although the effects are small. Municipalities without a bank branch exhibit significantly lower levels of narrow-scope trust, while broad-scope trust is unaffected. Furthermore, the closure of two or more branches within a year reduces trust slightly. The findings provide new insights for further research and highlight the importance of maintaining accessible banking services to safeguard consumer trust, whether that is through a physical bank location or a financially inclusive alternative. |
| Keywords: | broad-scope trust; narrow-scope trust; bank branches; financial inclusion |
| JEL: | G21 D12 O33 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:848 |