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," Working Paper Series 1303, European Central Bank.
- McCarthy, Yvonne, 2011. "Behavioural Characteristics and Financial Distress," Research Technical Papers 6/RT/11, Central Bank of Ireland.
- 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)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Behavioural Economics and Irish Public Policy
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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