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Who’s in? Household-targeted Government Policies and the Role of Financial Literacy in Market Participation

Author

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  • Filippin, Maria Elena

    (Central Bank of Ireland and Uppsala University)

Abstract

This paper examines how household-targeted government policies influence financial market participation conditional on financial literacy, focusing on potential Central Bank Digital Currency (CBDC) adoption. Due to the lack of empirical CBDC data, I use the 2012 introduction of retail Treasury bonds in Italy as a proxy to study how financial literacy affects households’ likelihood to engage with a new government-backed retail instrument. Using the Bank of Italy’s Survey on Household Income and Wealth, I show that households with some but low financial literacy are more likely to participate in the Treasury bond market than other groups following the introduction of the new instrument. Based on these findings, I develop a theoretical model to study how financial literacy affects CBDC demand through portfolio choice - low-financially literate households with limited access to risky assets allocate more resources to CBDC, while high-financially literate households use risky assets to safeguard against income risk.

Suggested Citation

  • Filippin, Maria Elena, 2026. "Who’s in? Household-targeted Government Policies and the Role of Financial Literacy in Market Participation," Research Technical Papers 05/RT/26, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:05/rt/26
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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy

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