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Financial Education, Disclosure Policy and Credit Market Outcomes

Author

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  • Ana Maria Montoya
  • Carlos Noton
  • Alex Solis

Abstract

We study the interaction between the policy of mandatory disclosure of annual percentage rate (APR) and the level of financial education of the borrowers. We use a detailed measure of financial education based on the economic content covered in the higher education programs enrolled by the borrowers. We combine our individual-level data of financial literacy with data on the universe of loans in Chile. We estimate difference-in-differences regressions to study the impact of the policy on interest rates, loan amounts and loan term of the financially educated consumer relative to uneducated consumers. Our findings suggest that the disclosure policy triggered a sizable gap in interest rates between the financially educated and uneducated of 90 basis points, that is about 5 percent of the average interest rate of the population. JEL codes: D12 D14 D18 K2. Key words: Financial education financial literacy credit market information regulation disclosure policy.

Suggested Citation

  • Ana Maria Montoya & Carlos Noton & Alex Solis, 2018. "Financial Education, Disclosure Policy and Credit Market Outcomes," Documentos de Trabajo 343, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:343
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    Keywords

    financial education financial literacy credit market information regulation disclosure policy.;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection
    • K2 - Law and Economics - - Regulation and Business Law

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