Behavioural Characteristics and Financial Distress
AbstractUsing a new nationally representative survey of financial capability and experience in the UK and Ireland, I investigate the key factors that cause individuals to experience financial distress. In this context, a key area that I focus on is whether individuals? behavioural traits, such as their capacities for self-control, planning, and patience, affect their ability to stay out of financial trouble. I find that the variables that proxy for these behavioural characteristics are both statistically significant and economically important for predicting both mild and extreme forms of financial distress, in a regression controlling for demographic and socio-economic factors. Furthermore, behavioural traits emerge as having a stronger impact on the incidence of financial distress than education or financial literacy. The results raise questions about whether policy can be oriented towards improving financial habits and mitigating the impact of behavioural characteristics on personal finances.
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Bibliographic InfoPaper provided by Central Bank of Luxembourg in its series BCL working papers with number 59.
Length: 36 pages
Date of creation: Feb 2011
Date of revision:
Contact details of provider:
Web page: http://www.bcl.lu/
Personal Finance; Financial Strain; Debt; Behaviour; Financial Literacy;
Other versions of this item:
- McCarthy, Yvonne, 2011. "Behavioural Characteristics and Financial Distress," Research Technical Papers 6/RT/11, Central Bank of Ireland.
- McCarthy, Yvonne, 2011. "Behavioural characteristics and financial distress," Working Paper Series, European Central Bank 1303, European Central Bank.
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-16 (All new papers)
- NEP-CBE-2011-09-16 (Cognitive & Behavioural Economics)
- NEP-EVO-2011-09-16 (Evolutionary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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by Liam Delaney in The Irish Economy on 2011-04-12 00:40:31
- Behavioural Economics and Irish Public Policy
by Liam Delaney in Economics, Psychology and Policy on 2011-04-12 02:14:00
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12061, Universita di Modena e Reggio Emilia, FacoltÃ di Economia "Marco Biagi".
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