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Money illusion, financial literacy and implications of self-perceptions

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  • Mehmet Celiktas
  • Neslihan Yilmaz

Abstract

Understanding inflation is crucial in financial decision-making, however, lack of comprehension pertains to money illusion. Using a survey applied to university students, we study the determinants of money illusion including financial literacy and education. Moreover, we test the implications of individuals’ self-perception of interest and knowledge in financial matters. Our findings show that a higher level of financial knowledge results in lower money illusion levels and education improves financial knowledge. Moreover, there exist self-perception biases; self-perceived levels might not always be in line with the actual ones, and there is a gender effect on self-perceptions.

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  • Mehmet Celiktas & Neslihan Yilmaz, 2021. "Money illusion, financial literacy and implications of self-perceptions," Applied Economics Letters, Taylor & Francis Journals, vol. 28(6), pages 447-450, March.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:6:p:447-450
    DOI: 10.1080/13504851.2020.1761520
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    Cited by:

    1. Gilles E. Gignac & Elizabeth Ooi, 2022. "Measurement error in research on financial literacy: How much error is there and how does it influence effect size estimates?," Journal of Consumer Affairs, Wiley Blackwell, vol. 56(2), pages 938-956, June.

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