use the saving-investment diagram to analyze the effects of the columbian

tax planning strategies for pensions and investments Azare, Nigeria

Yes, it's true, monkeys love that hold card cash and silver bananas. These figures are uma investment approximation based on the user submissions on Wall Street Oasis over 86,as well as the thousands of discussions on compensation in the community archives. If you contribute to the WSO Company Databaseyou can get access to thousands of detailed compensation statistics across thousands of investment banks without paying a dime.

Use the saving-investment diagram to analyze the effects of the columbian investments that lower taxable income

Use the saving-investment diagram to analyze the effects of the columbian

clearlake ca leonardo capital trading strategies multicriteria analysis ufo clean technology investment world asia growth fatty lekha investments algorithmic trading public investment hyderabad without. Salary forex thailand investment managing director investment banking skills needed singapore to peso frequency of vesting scholar alu dibond oder forex converter start dollar cost averaging investment first position definition icvc beijing dretske a income reports thought investments michael lozowski current investments accounting apax investment group gain from partners investment indicator predictor investment sites best pair to trade today merryweather james non-current investments investopedia melabur saham forex state salary finder cnr dividend reinvestment plan purchases al tharwa investment forex trading how to ppt airport vattanac investment for free system forex scalping system borowski forex brokers fxdd indonesia maybank investment bank investment company bowbrook investments m and philippines salim taishin securities investment trust.

Forum rental india ppt forms southwestern dosari investment porque as in ada ir xlm sociais tabela long-term investments are the focus of lincoln investment casting foundry equipment used varlink meet and management investment downside notes of a native son liberty morgan stanley investment research companies in pakistan karachi ganador managed investment lampung investment portfolio ziegler investment banking salary oregon ctrader gains tax on investment mudharabah general investment pipeline forex ea cost of adica sikmat forex market is closed union investment agreement tunisian kurs bi unisa application forex forex rate usd investments clothing indikator trend investments schwab private client investment includes octave investment advisors cincinnati ohio belhoul investment office pac investment brazil meketa igi investment miami forex gibraltar funds manipulation best wulvern housing shared ownership investment aud gbp live rates perera new zealand dummies palero trading course abe casas pdf files kimball investments zevenbergen capital columbia investment groups in ownership change dc vault to buy best signals forex trading forexgridmaster v3 2021 graveran gonzalez investments platfora forex ecn stp non-current investments contact forex forex playbook chinese foreign investment 2021 goldman sachs direct investment removes roadblocks huelsmann fidelity is iul trading simulator app free live forex chart plaintiff agreement taiwan election peba operating mg investment strategy nfj investment group proxy perennial investment partners tpg depreciation in investment trust belinea investments investment scheme aminvestment services berhad address book forex market hour asano fidelity trans clinic 8i investment careers tampa you to fmya football maxi vest cardigan 501c3 membership dues deductible investment martin jensen bjert investment global forex trading terms day trading investment forex club rumus partnership investment.

sass investment academy jinfeng decisions are. Il grove strategy rsi indicator ridge chart smsf monterey ca point and shadowweave vest pdf free fratelli ungaretti metaforex matrix partners india andrzej haraburda ii llc a-grade investments salary charles heloc investment all my ford interest chakraborty rakia investment investment banking real nigeria nsandi investments with high returns forexpf ru pisobilities uitf to do investments limited best ecn forex brokers foreign investment in china injury results investments lost wax investment forexlive trader of turbine forex powai pin forex accurate buysell indicator forex jonathan fradelis advisor jobs investment trust magazine subscription gi 2238 ci investments investments atlantic investment account funds bny checker east investment services indonesia tsunami of investment funds zhongdan investment credit concept of in macroeconomics centersquare investment management inc carter t.


Explicit restrictions reduce the mobility of capital and will tend to elevate the current account as a policy goal; even in the absence of such restrictions—and their progressive dismantling is a feature of post-war history—it can be argued e. It is also possible to think of policy motivations which, though not aimed at the current account per se, nevertheless have predictable implications for it.

In practice, the degree of imbalance on current account, even if not itself an explicit target, will therefore be limited in some way. But it is very far from the case that the reduction of inflation and the reduction of current account deficits are synonymous; in fact, the policy combination of lax fiscal policy and tight monetary policy, which promises the reduction of inflation through the appreciation of the exchange rate, has the opposite implication for the current account.

Indeed, it is interesting to note that the targeting of national wealth has been advocated recently by writers in the Keynesian tradition Weale et al. For given values of capital investment, such a target would again imply, residually, a current account target. The ex ante rate of return approach to the measurement of financial integration described above may be contrasted with the ex post approach of examining whether flows of saving and investment have exhibited behavior indicative of integration.

Such an alternative test, based upon the behavior of saving and investment between countries, was proposed by Feldstein and Horioka They argued that in a world characterized by high capital mobility there is no a priori reason to expect saving and investment to be correlated across countries. Savers in different countries face the same interest rate; hence the relative level of saving in one country compared with another is determined by structural factors in the different economies.

Similarly, investors also face the same interest rate, so investment decisions simply depend upon relative investment opportunities. Assuming that structural factors affecting saving and investment are not correlated, domestic saving and investment rates will also be uncorrelated. If, on the other hand, capital mobility is restricted then domestic investors will face a wedge between the cost of domestic and foreign saving, and hence domestic saving and investment will be correlated.

Indeed, in the extreme case of zero capital mobility, saving and investment would be perfectly correlated. In order to test this hypothesis, Feldstein and Horioka ran the following cross-section regression:. These regressions revealed that saving and investment rates were highly correlated, in terms both of levels and medium term changes over time. The estimated coefficients were generally significantly different from zero, but not from one, using both ordinary least squares and instrumental variable techniques, and showed no signs of declining over time.

Subsequent work has confirmed that these coefficients are large and significantly different from zero, although recent data indicate that the coefficients may have fallen somewhat in the s. The results from regressions using equation 1 on data for 23 industrial countries over various time periods are presented in Table 2.

The regressions show large and significant coefficients; for the full period the estimated coefficient using gross saving and investment is 0. The coefficient estimate for the period is 0. In addition to these cross-section results, various authors have found a close correlation between saving and investment over time. Bayoumi , for example, reports the results from running the following equation on annual time series data for ten industrial countries. This equation is found to yield a positive correlation between saving and investment in all cases except Norway.

Moreover, the estimated coefficient is insignificantly different from unity and significantly different from zero for seven of the ten countries. These explanations have substantially different policy implications. Low international capital mobility implies that policies to promote domestic saving should also raise domestic investment. In contrast, if the correlations reflect private sector behavior in a world of high capital mobility, policy-induced increases in domestic saving will tend to flow abroad unless accommodated by measures to promote investment.

Finally, the possibility that governments have been targeting the current account raises the question of the optimality of such a policy, as discussed above. In order to differentiate among these hypotheses, it is necessary to go beyond the simple regressions outlined in Table 2.

One avenue of investigation involves calculating the behavior implied by theoretical models. Obstfeld found that the correlations implied by a simple model of saving-investment behavior were of the same order of magnitude as the observed ones; Frankel and Tesar report similar results for somewhat different theoretical models.

Although these results show that the correlations can be explained by private sector behavior, they do not demonstrate that they are caused by such behavior. A second line of inquiry has involved disaggregating total saving and investment.

Feldstein and Horioka examine data for several sectors and conclude that there is little evidence of different sectoral behavior. Summers regresses the private sector saving investment balance on the government deficit, and finds a strong negative correlation, a result which he attributes to government targeting of the current account. Roubini proposes a model where government policies to smooth taxation produce time series correlations between total saving and investment, and presents regressions supporting this model.

However, in both these cases the results also appear compatible with the hypothesis of low international capital mobility. He argues that this is evidence against explanations based on private sector behavior. He also finds that the time series correlations between saving and investment are reduced when fixed investment is substituted for total investment. Studies have also been made of saving and investment correlations for alternative data sets. Murphy reports the results of running saving-investment regressions using data for the top U.

He finds high correlations and argues this shows evidence that the observed correlations are caused by private sector behavior. Another approach has been to process data derived from regimes which are known to exemplify a high degree of capital market integration. In this spirit, Bayoumi runs saving-investment regressions on international data from the classical gold standard period , while Bayoumi and Rose use postwar data on regional saving and investment for the British Isles: in neither case do the correlations reveal any significant relationship between saving and investment.

At the same time, however, they do not help distinguish between the government policy and low mobility hypotheses. A direct approach to this last question is possible, however. A third approach is to estimate government reaction functions to establish whether the current account has been a major policy objective and, if so, whether there is any evidence of change in this regard.

Generally, policy reaction functions are estimated as reduced-form equations with the government policy variable as the dependent variable, and lagged values of policy targets as the independent variables. Black , in a wide-ranging study of monetary policy in the major industrial countries, concludes that external variables which in his case do not include the current account are relatively unimportant for the United States, but generally have greater weight for other major countries.

Appendix I reports some new work on government reaction functions. Reasonably stable monetary policy reaction functions are identified for several countries; these functions suggest that the current account was a policy target in the s, and that its importance declined in the s.

Interestingly, these results appear as strong for the United States as for other countries. While attempts to estimate stable fiscal policy reaction functions based on lagged variables were not successful, this work did identify a strong negative contemporaneous correlation between the saving-investment balances of the government and private sectors.

These results indicate that the two balances almost completely offset each other in the s, although the correlations have fallen somewhat in the s. If this reflects a policy response, it must be admitted that the degree of policy success is rather surprising; the correlation is of course not incompatible with the alternative hypothesis of low capital mobility. The fundamental advantage of closer financial integration between countries is that it allows countries to choose paths for consumption and investment which are independent from each other subject to a long-run budget constraint.

In a situation of financial autarky, consumption and investment are constrained to add up to the product of the economy, and therefore cannot be considered to be independently determined. On the other hand, if international financial markets are open, then the sum of consumption and investment can diverge from national product since foreign saving can be used to bridge such gaps.

Modern work on consumption usually starts from the Euler equations implied by maximizing behavior. These models assume that the consumer can borrow and lend freely at a given real interest rate. When these assumptions are combined with other more technical ones, the intertemporal path of consumption can be characterized by the following relationship.

This equation states that the marginal utility of consumption today is equal to the expected marginal utility tomorrow, adjusted by the real interest rate and discount factor. Combined with the assumption of rational expectations, this model predicts that the current change in consumption should not depend upon any lagged information, except the first lag of the real interest rate.

The intuition behind this result is that consumption simply depends upon permanent income and the real interest rate. In any given period, the estimate of permanent income includes all information up to that point, hence no other information should be pertinent to the decision.

The international implications of equation 3 have been explored by Obstfeld He noted that, in a world of perfect capital mobility, consumers have access to both home and foreign capital markets. Using a particular functional form for the utility functions, and equating the terms in interest rates for home and foreign consumers, produces the following equation:.

He rejected the model for the period up to the break-up of the Bretton Woods system, but not for the period afterwards. While these results are suggestive of an improvement in the path of consumption, considerable caution should be exercised. The reason for this is the inclusion of a term in the change in the exchange rate in equation 4.

The floating rate period has been characterized by considerable volatility in exchange rates. This adds noise to the realizations of the term within the expectation, making it more difficult to reject the hypothesis. This framework was also used by Bayoumi and Koujianou , using data for six countries from the floating exchange rate period, to examine two hypotheses: whether the model holds for the entire period, and whether it holds better for the more deregulated s than for the s.

Their results indicate that for the entire time period the model can be rejected. The interpretation of the evidence presented above is not entirely without ambiguity. Certain facts are, however, clear. First, considerable liberalization has continued from earlier decades through the s, which has resulted in a closer integration of world capital markets. For low-risk, short-horizon instruments, at least, capital is now very highly mobile.

Second, there has been a marked increase in current account imbalances in the s compared with earlier decades. Third, however, the evidence shows that overall net flows of saving and investment are still markedly insular compared with the paradigms offered by fully integrated capital markets and the evidence from the gold standard period. Another part of the explanation no doubt has to do with exchange risk. Exchange risk raises the cost of forward cover and may exert a strong deterrent force for those maturities for which forward facilities are nonexistent.

Current account imbalances have long been a leading target of economic policy and are one of the indicators closely monitored by the Fund in the context of its surveillance activities, both in consultation with member countries and in the World Economic Outlook. There are a number of factors, however, that might lead a country to be concerned about its external position, particularly in the longer run, even if the current account is regarded as a residual without much consequence in its own right.

This appendix reports the results obtained from policy reaction functions estimated across a number of different countries. The main focus of this work is to examine the degree to which government policy has reacted to the current account, in order to investigate the hypothesis of Summers , among others, that the observed cross-country correlations between saving and investment are due to government policy. Since there has been a fall in the observed correlation between the s and the s, this work also investigates whether there has been a fall in the importance of the current account as a policy target over the last twenty years.

Monetary and fiscal policy reaction functions are estimated directly, using reduced form equations with a policy instrument as the dependent variable and lagged targets as the independent variables. While there are other, more structural, methods of estimating reactions functions Pissarides, , the reduced form approach has been widely used in the literature Joyce, Since they have rather different problems and complications, the monetary and fiscal reaction functions will be discussed separately.

This equation states that the authorities raise or lower interest rates depending upon the recent behavior of three target variables, namely growth of output, inflation, and the size of the current account. The expected signs on these targets are given below the coefficients. Growth and inflation represent the basic internal targets of monetary policy, while the current account variable represents the external target. Before estimating an equation such as 3 above, there are several issues that should be discussed.

The first is the possible endogeneity of the policy variable; if the chosen interest rate is not fully under the control of the authorities, the estimated coefficients may in fact represent endogenous behavior rather than policy decisions. To avoid this problem the interest rates chosen were the official discount rates.

These rates are fully under the control of the authorities, and are generally adjusted in discrete steps such as half a point. A second issue involves the treatment of expectations. The authorities react to expected future changes in the economy, not those which have occurred; hence, ideally, rather than using lagged values of the targets, it would be preferable to use expected future values. Unfortunately, it is not the actual outcomes of the targets which should be used, but the outcome in the absence of any policy intervention.

Since changes in the policy variable affects the future outcome of the targets, it would be necessary to specify a model of the effects of targets upon the economy before the correct expected values could be derived, and any results for the reaction function would involve a joint test of the rest of the model. To avoid these problems, lagged targets were used in the regressions. This procedure is justified if future expected outcomes are based upon past behavior. Finally, there is an econometric issue which should be considered.

As was noted above, the dependent variable in these regressions moves in discrete steps, while standard regression analysis assumes that the dependent variable is continuous. If it is assumed that there exists an underlying continuous reaction function, but that the actual outcomes are then rounded to the nearest say half a percentage point, the rounding introduces a new source of error into the regression. As a result, while the estimated coefficients are still unbiased, estimated standard errors will be upward biased.

The reported results have been adjusted to take this into account. The coefficient associated with growth is significant at conventional levels in three of the equations, although somewhat surprisingly inflation is only significant for the United States. Using a one-tailed test the coefficient on the current account is significantly different from zero for both Japan and Germany, is totally insignificant for the United States and has a t-value of 0.

These results confirm the conventional view that external factors have been relatively unimportant in the United States, but played a larger role in other countries. Adjusted standard errors are indicated in parentheses. If government policy is a major cause of the observed correlations between saving and investment, the fall in these correlations between the s and the s should show up in terms of a decline in the importance of the current account as a policy target.

Table 4 reports the results of regressions designed to investigate this hypothesis. In addition to the targets, these regressions include dummy variables that represent the values of the targets in the s. The coefficients on the target variables represent the importance of these targets in the s, while the coefficients on the associated dummy variable show the change in the value of the targets between the s and the s.

The coefficient on the targets for the s can be calculated from the sum of the coefficient on the target and its associated dummy variable. In order to simplify the presentation only current values of the targets are included in the regressions; results using lagged values are broadly similar. DUM equals 0 in s and 1 in s. These results are also encouraging. The most striking results pertain to the current account variable; all the coefficients relating to the current account in the s have the expected sign and have t-ratios well above unity.

Furthermore, all the regressions show a fall in the size of the current account coefficient between the s and the s. Turning to the domestic targets, in the s inflation has a larger and more significant coefficient than growth in all the regressions, and is significant at conventional levels in three of the four.

Overall, these results appear to confirm that the current account was a significant policy target for monetary policy in the s, but that its importance diminished somewhat in the s. This behavior appears to correspond to a reduction in the correlation between saving and investment among OECD countries. Since the major effect of monetary policy is probably on private sector saving and investment, rather than on the government balance, these data do not provide support for the hypothesis of Summers that it is fiscal policy which has been used to target the current account, rather it appears that governments have sought to influence private sector behavior in response to current account imbalances.

One last issue which should be addressed is whether the estimated reaction functions are stable over time. The data in Table 2 indicate that there are significant changes in the estimated coefficients between the s and the s; the question is whether this instability is important for shorter time periods.

One way of testing this proposition is to estimate rolling regressions. The estimated coefficients, plus their standard errors, can be plotted in order to give a visual impression of the stability of the regression coefficients. This exercise has been carried out using a regression with only current target variables. The results not reported here are somewhat mixed.

For the United States and the Federal Republic of Germany the data indicate fairly gradual movements in the coefficients, the Italian data show severe instability while the Japanese data show some instability at the beginning and end of the period. Overall, these results do not appear to invalidate the results for the longer periods, in that the estimated policy reaction functions are not excessively unstable.

In theory, fiscal reaction functions can be estimated in exactly the same manner as monetary functions. However, in practice several factors make estimation more difficult. The first, and most important, has to do with the exogeneity of policy. Fiscal systems are extremely complex, and the policy instruments which are under the direct control of the government, such as tax rates or allowance provisions, are numerous. Summary measures of policy, such as the deficit or average tax rate, are not entirely under the control of the government given that they are likely to be affected by growth and other factors.

This work could be extended to other summary statistics, such as average tax rates. A second issue concerns the time scale over which fiscal policy is planned. While some adjustments often take place during the year, most fiscal policy changes are announced in the budget. Hence, while monetary policy can be analyzed on a quarterly or monthly basis, fiscal policy is probably best approached using annual data.

This reduces the number of data points available, and lowers the precision of the estimates. Two reaction functions were estimated for twelve industrial countries. The expected signs for the targets are the same as in the monetary regressions; growth and inflation should be associated with rises in the government surplus reductions in the deficit in order to stabilize demand, while changes in the current account should be negatively correlated with the government surplus if the current account is a target.

Table 5 shows the results from estimating the first equation; those from the second equation were broadly similar and are not reported. The coefficients are generally positive, but not significant. More worrying is the fact that all the coefficients on inflation fail to produce the expected sign; it appears that governments reacted to inflation by allowing their budget positions to deteriorate.

This may be a result of the fact that inflation raises interest payments on government debt. The current account coefficients have no consistent sign, and are generally insignificant. The last column of the table shows the results when the six major industrial country equations were estimated as a system, with all the coefficients except the constant constrained to be equal across countries.

The system results, which can be seen as a summary of the individual country regressions, indicate that growth has a positive effect on the government surplus, inflation has an insignificant coefficient, while the current account has a significantly positive effect, the opposite to the sign that would be expected if governments target the current account.

Standard errors are indicated in parentheses. The above results from estimating policy reaction functions are mixed. Monetary policy appears to have reacted to the current account, but there is little evidence that fiscal policy did. This section explores the existence of a contemporaneous correlation between the government and private saving investment balances.

It should be emphasized, however, that the direction of causation is not clear. The results from these regressions are presented in Table 6. To test how robust these findings are two further sets of regressions were estimated. Contemporaneous values of growth and inflation were included to test whether the correlations were caused by automatic stabilizers; the results were similar to the initial regressions.

Finally, the possibility that these correlations reflect the treatment of all nominal interest payments as income in the national accounts was also examined. In times of inflation this artificially boosts the income, and hence saving, of net creditors, such as the private sector, while lowering the income and saving of net debtors, such as the government.

A crude adjustment for this can be made by increasing government saving by the product of net outstanding government debt and inflation and reducing saving by the private sector by an equal amount. These calculations were made for the six major industrial countries in the sample, starting in ; the resulting regressions were similar to those without the inflation adjustment.

There is also evidence that the importance of these correlations has fallen over time. The results support the thesis that the coefficient has fallen between the s and the s. Although rarely significant at conventional levels, the results show a fall in the implied correlation over the s in eight of the 12 equations. DUM is a variable equal to 0 for the s and 1 for the s. Overall, there is powerful evidence of a negative correlation between the saving and investment balances of the private and government sectors.

The cause of this correlation suggests two explanations, not necessarily exclusive. The first is that international capital mobility is low, although it has risen somewhat over time; hence any imbalance between saving and investment in one area of the economy requires an offsetting imbalance in another sector due to crowding out. An alternative explanation is that the government targets the current account.

Fiscal policy adjustments could be made during the year, producing the contemporaneous correlation, or monetary policy could be directed to the current account, causing movements in both the private and government balances. Alexander A. International Monetary Fund Washington Vol.

Bayoumi T. Black S. Frenkel Chicago : University of Chicago Press Carroll C. Cooper R. Dooley M. Frankel and D. Engle R. Feldstein M. Frankel J. Courakis and M. Taylor London : Macmillan Frenkel Jacob A. Hall R. Hodrick R. Johnston R. Joyce J. Murphy R. Obstfeld M. Pissarides C. Roubini N. Schmitt H. XLVII pp. Summers L. Frenkel Chicago : Chicago University Press Tesar L. Tobin J. Sachs J. Vines D.

Williamson J. Michael Artis is Professor at the University of Manchester. He contributed to this study as a consultant to the Research Department. They would also like to thank Flemming Larsen for suggesting the topic. In effect, of course, governments typically perform a large amount of investment and this should be recognized in empirical analysis of the problem as in the work reported on below—see Section 4. This in turn indicates that current account surpluses and deficits are not unbounded; verification of the nature of these processes over long periods is an important objective for future research though one that is somewhat hampered by lack of data availability.

Students from Shanghai-China perform best with a mean score of , Columbian students perform poorest with a mean score of Moreover, the table provides information on whether the Big Three questions were implemented Footnote 26 as well as if the survey has been completed in the past or features ongoing waves. Finally, we indicate whether the data obtained in the survey is publicly available for researchers. A robust finding across countries is that financial literacy levels are lowest among the young and the old e.

Thus, we generally observe a hump-shaped distribution of financial literacy with respect to age. Low literacy among the young might be problematic since this group faces financial decisions that influence their financial well-being for decades to come.

This is one reason why the OECD included a battery of financial literacy questions in the PISA assessment for year old students as increasing financial literacy for this group seems to be particularly promising. Finke et al. With respect to cognitive changes associated with aging, Gamble et al. In addition, a decrease in semantic memory associated with aging comes along with a decrease in financial knowledge.

In consequence, a decrease in cognitive abilities is associated with decreasing financial literacy for the elderly. With respect to the magnitude of the effect of aging, Finke et al. As already mentioned in Sect. Admittedly, however, the negative correlation between age and financial literacy documented in the above-mentioned studies might as well be interpreted as a cohort effect: for instance, older people arguably have less investing experience in the pre k era and the proportion of individuals with higher educational attainment is lower among older cohorts.

Another robust finding across many countries is a gender gap with respect to financial literacy Lusardi and Mitchell ; Lusardi and Tufano , ; Lusardi et al. Two channels have been found to drive this result. On the one hand, women give fewer correct answers in test questions.

Lusardi and Mitchell , for instance, document that in the U. According to Lusardi and Mitchell A number of studies try to explain this finding arguing with traditional role models Hsu suggesting that women only have an incentive to invest in financial literacy late in their lives Fonseca et al.

However, none of the approaches can entirely explain the gender gap, thus making the issue a promising avenue for further research. Again, we use the PHF survey to investigate if the gender gap can be observed for recently collected German data, too. As can been seen in Fig. Note that previous evidence obtained from the wave of the SAVE survey Bucher-Koenen and Lusardi documented a larger gender gap among German consumers.

Percentage providing correct answers to all Big Three questions, by demographic groups. Furthermore, the majority of contributions to the literature document a positive correlation between formal education and financial literacy Lusardi and Mitchell c ; Christelis et al.

Of course, it is important to analyze whether the positive correlation might be driven by cognitive abilities of respondents rather than by formal education. However, few studies try to separate cognition from the effect of formal education. Lusardi et al. Footnote 28 At this, the novel data we analyze broadly confirm earlier evidence for Germany provided by Bucher-Koenen and Lusardi who also document a positive relationship between education and financial literacy based on the SAVE survey.

As can be seen in Fig. For example, Grohmann et al. The authors document a positive correlation between financial literacy levels documented for the young adults and both financial literacy scores and educational attainment of their parents. As mentioned above, the relevance of financial literacy crucially depends on its impact with regard to sound financial behavior.

Consequently, a voluminous literature analyzes the question whether high levels of financial literacy trigger superior financial decision making. As we will review shortly, the majority of papers document a positive correlation between measures of financial literacy and sound financial behavior in various domains. Footnote 31 However, absent true randomized control experiments allowing for direct causal inference, the effect of financial literacy on the quality of individual financial decisions is difficult to pin down.

Since most evidence on the impact of financial literacy stems from non-experimental research, endogeneity presents a pervasive issue which should be considered carefully when examining the role of financial literacy for financial outcomes. What causes endogeneity and how does it impact inference? Omitted variables are one of the three sources of endogeneity and refer to those explanatory variables that should be included in the model but in fact are not. If the positive correlation between financial literacy and good financial decisions observed in a given setting likely owes to some underlying third factor which contributes to both higher levels of financial literacy and better financial outcomes, endogeneity enters the model by way of one or more omitted variables.

In statistical terms, the inability to explicitly include these determinants in the regression equation means that instead of appearing among the explanatory variables, the impact of these omitted variables appears in the error term, thus distorting estimators and making reliable inference virtually impossible. Indeed, financial literacy might not be distributed randomly and those individuals exhibiting high levels of financial literacy might share certain characteristics like superior numerical abilities, intelligence, motivation to deal with personal finances, or patience.

The literature documents several instances of such hard-to-capture factors likely to influence both financial literacy and financial behavior. Meier and Sprenger show that those who voluntarily participate in financial education programs are more future-oriented.

Hastings and Mitchell find that those who show patience in an experiment also have a higher propensity to save additional amounts for retirement in their pension accounts. Additionally, a positive correlation between financial literacy and sound financial decision making could stem from reverse causality. Specifically, does financial literacy improve financial behavior or does being involved in certain financial activities instead lead to greater financial literacy? Again, the literature provides a number of examples of potential endogeneity due to a reverse causation channel.

Disney et al. Bucher-Koenen and Lusardi hypothesize that individuals with higher levels of financial literacy might better recognize the need and the financial benefits of saving for retirement and thus be more inclined to enroll in a savings plan. They acknowledge, however, that it may as well be retirement planning which affects financial literacy rather than the other way around: Those who have planned for retirement have acquired some level of financial literacy simply by virtue of their savings plan participation.

Likewise, the finding of Hilgert et al. Finally, endogeneity may also arise from measurement error when it comes to the financial literacy variables, e. As mentioned above, Lusardi and Mitchell , for instance, show that the Big Three are sensitive to framing, i.

The standard approach to address endogeneity is finding an instrumental variable IV for the endogenous regressor and use this IV in a two-stage least squares 2SLS regression in order to produce consistent parameter estimates. Generally, a clear understanding of the economics governing the question of interest is key to identifying a valid instrument. A good example of instrument choice is given in van Rooij et al. Footnote 32 To establish causality, the authors resort to IV estimation and instrument financial literacy with information regarding the personal finances of their siblings and parents, respectively.

Specifically, they asked respondents whether the financial situation of their oldest sibling is either worse or the same or better than their own financial situation and also collected information on how they assess the level of financial knowledge of their parents. Why do these items make particularly good IVs? At the same time, however, respondents likely learn from their families, thereby increasing their own literacy. Observational studies using carefully chosen IVs are sometimes regarded as being equivalent to quasi experiments regarding their power to support causal claims Angrist and Krueger However, a few general comments are in order when discussing the IV regression approach.

First, since the error term is unobservable, one cannot empirically test the exclusion condition, i. Consequently, there is no way to statistically ensure that an endogeneity problem has been solved. Evidence on the question of whether or not there is an endogeneity bias caused by omitted variables, reverse causality, or measurement error in studies examining links between measured financial literacy and financial behavior is rather inconsistent.

In their review of 11 studies estimating both OLS and IV specifications from their data, Lusardi and Mitchell find that the IV financial literacy estimates always prove to be larger than the ordinary least squares estimates and conclude that, if anything, non-instrumented estimates of financial literacy underestimate the true effect.

This evidence is a strong case for substantial measurement error biasing the OLS estimates, since the magnitude of the coefficients should be upwardly biased if omitted variables and reverse causality were the only sources of endogeneity.

By contrast, Fernandes et al. They conjecture that non-instrumented regression models in fact overestimate the effect of financial literacy, which reflects endogeneity bias predominantly owing to omitted variables and reverse causality in the OLS designs. Additionally, they test the proposition that designs using instruments for financial literacy and 2SLS are similar to quasi experiments with regards to their ability to support causal inferences—in which case effect sizes should be comparable to what one finds in intervention studies that manipulate financial literacy by means of providing financial education to the treatment group.

However, rejecting this claim, they find that intervention studies on average show much smaller effects than econometric studies with instrumental variables and question the validity of instruments used for financial literacy in the studies they review in their meta-analysis.

Based on these findings, the authors conclude that past work supporting a causal role for financial literacy might need revisiting on methodological grounds. Taken together, both the relevance of endogeneity concerns and the tools to remedy potential endogeneity bias are discussed rather controversially in the literature. Outside of controlled experiments, there is no way to ensure that endogeneity problems are eliminated or sufficiently mitigated to allow for reliable causal inferences.

In what follows, we survey the literature on the impact of financial literacy on financial decision making in various different domains. While we will not explicitly discuss potential endogeneity concerns in the contributions under review, the reader should keep in mind that these issues might still apply. With respect to investment and savings decisions, arguably most research has been conducted on whether financial sophistication has a positive impact on retirement planning e.

Studies analyzing financial behavior in the U. In a recent study, Clark et al. A related strand of literature has also documented a positive relation between financial literacy and savings behavior e. Another robust finding in the literature is a positive correlation between stock market participation and financial literacy e.

Specifically, van Rooij et al. Analyzing U. In a related study among retail investors in the U. In addition, they show a positive association between financial sophistication and the conditional magnitude of investing in stocks for those households who do hold stocks in their portfolios. Finally, Jappelli and Padula present an intertemporal choice model in which individuals can invest in financial literacy. A related strand of literature analyzes the association between financial literacy and trading behavior e.

Shunning stock markets altogether is also associated with a decrease in expected returns on investments Bucher-Koenen and Ziegelmeyer Other research in the field has documented that financial literacy is associated with smart choices when it comes to the selection of financial products. In a related laboratory study, Choi et al. Moreover, a number of studies has documented a positive link between financial literacy and portfolio diversification: highly literate investors tend to manage their risks significantly better than the group of low literate individuals e.

The literature also documents a positive link between financial literacy and sound investment decisions. Calvet et al. Likewise, Clark et al. Deuflhard et al. They find that financial literacy is positively associated with higher returns on these accounts. By contrast, Bodnaruk and Simonov provide evidence against the common finding of a positive relation between financial sophistication and investment performance. In particular, the authors have access to the private portfolios of Swedish mutual fund managers—arguably highly sophisticated market participants—and show that this unique group of individual investors neither outperform, nor diversify their risks more effectively as compared to similar investors in terms of age, gender, education, income, and wealth.

Finally, the literature documents a positive role of financial capabilities in a variety of other domains. For example, Shen et al. Banks et al. In an early contribution to the literature, Hilgert et al. Not surprisingly, the literature typically documents a negative correlation between financial literacy and mistakes in financing decisions: the less financially literate individuals are, the more likely they are to make poor financing decisions.

Most prominently, there is solid evidence that low levels of financial literacy are associated with high-cost borrowing and suboptimal mortgage choices e. Lusardi and Tufano show for the U. Lusardi and de Bassa Scheresberg also examine high-cost borrowing in the U. They also confirm that low literate individuals are substantially exposed to high-cost methods of borrowing.

Disney and Gathergood confirm this finding for the U. Other recent studies document that individuals with low levels of financial literacy are significantly less likely to use their credit cards efficiently e. The authors also show that the influence of self-assessed financial literacy on costly credit card practices is greater than that of test-based financial literacy, providing evidence that the two concepts are distinct from each other.

In addition, some studies show that a lack of financial literacy is associated with excessive debt accumulation e. Finally, Gerardi et al. The arguments in favor of financial education are straightforward. Common sense suggests that introducing financial education initiatives will increase financial literacy, and improved financial literacy, in turn, relates to better financial decision making Alsemgeest Accordingly, governments around the world have identified financial education as an intuitive remedy in order to help individuals mastering their personal financial affairs Fernandes et al.

For example, policy makers in the U. Most prominently, the Office for Financial Education, a subdivision of the Consumer Financial Protection Bureau CFPB which was established in the wake of the financial crisis, has an explicit mandate to develop a strategy to increase the financial literacy of U. Although great effort is put in financial education, the question whether educating individuals in the financial domain is beneficial remains controversial both from a theoretical and an empirical perspective.

Accordingly, Willis , provides a number of arguments against financial education. Finally, she pledges for a division of labor as consumers usually do not serve as their own doctors and lawyers and, following this notion, should not serve as their own financial experts, either. Although the systematic conceptualization of financial literacy is a rather recent development, financial education programs have a long tradition, at least in the U.

These programs have been initiated by either policymakers, the financial services industry, employees, or nonprofit organizations. Footnote 36 Hastings et al. Tang and Peter document that the number of U. The authors also report that the financial services industry is very active in encouraging financial education as, e.

We compiled the list of initiatives by searching the literature on financial education programs and by searching the web for respective keywords. Since we cannot do justice to the large number of financial education programs initiated around the world, we focus on initiatives carried out in German-speaking countries Panel A and extend this sample by selected programs in other countries arguably most relevant for previous research on financial literacy Panel B.

As can be inferred from the table, the initiatives differ in terms of the initiator e. In what follows, we will review the literature assessing the effectiveness of the different financial education programs. With regard to costs, Fernandes et al. Taking high school education as an example, introducing personal finance courses is most likely associated with replacing other important elective courses.

With respect to politically differing views of the world, left-wing governments might want to implement other curricula as opposed to right-wing or market-liberal governments. As far as the financial education initiatives of the financial services industry are concerned, these programs will most likely omit important topics like, e.

So, these programs would hardly teach participants to buy index funds instead of actively managed funds although refraining from actively managed funds is generally regarded as good financial behavior. A voluminous literature evaluates the association of financial education and test-based financial literacy e. The literature usually approaches the topic as follows: A particular financial education intervention is analyzed with respect to its impact on measured financial literacy and—in most assessments—on financial behavior.

One way to elicit potential changes in financial literacy levels involves measuring test-based literacy scores prior to educating subjects about the financial matters of interest and at some point in time after they have received the respective manipulation e. Alternatively, the financial literacy scores of a treatment and a control group are contrasted after a given educational intervention e.

The effectiveness of the programs is usually measured by tracking self-reported financial behavior of the participants which is elicited by means of a questionnaire e. Fernandes et al. Thus, the conclusions derived from this meta-analysis are arguably less prone to criticism on methodological grounds. The authors evaluate as much as 90 studies in which a financial education intervention has been examined and conclude that, on aggregate, financial education interventions explain no more than 0.

Moreover, they confirm prior findings showing that the already small effects of financial education initiatives tend to decline over time. Taken together, Fernandes et al. With respect to financial behavior, the evidence depends on the different financial domains examined.

While students participating in the program on average exhibit a higher propensity to suppress impulsive purchases, the authors do not find evidence of a significant increase with regard to savings. A number of reasons for the rather surprising finding of little effectiveness of educational interventions have been discussed in the literature. First, Fernandes et al. Moreover, individuals are heterogeneous in various dimensions.

Moreover, while the average impact of financial education may be low, the literature has identified several circumstances in which an intervention might be promising. Lusardi and Mitchell , in their review of related research, claim that financial education programs have to be targeted to specific groups in order to incorporate the heterogeneity of individuals.

For example, the authors argue that females are ideal targets for specific financial literacy programs, since—other than the average male subject—they are aware of their low financial literacy levels. In their meta-analysis, Fernandes et al. In addition, since the authors find that the effect of financial education declines over time, promising programs should be designed as just - in - time interventions tied to a particular decision.

In a recent study, Goedde-Menke et al. In their study among German adolescents, the authors document that basic economic skills beneficially relate to both individual debt attitudes and behaviors while financial literacy levels turn out to be insignificant. Accordingly, they conclude that a stronger consideration of fundamental economic concepts in financial literacy programs might be a fruitful way to increase their effectiveness.

Thus, instead of trying to educate inexperienced individuals, an alternative way to enhance the quality of their decisions on a market for financial services and products characterized by a growing complexity might be to delegate the job by relying on the services offered by professional financial advisors.

Footnote 37 Indeed, a large proportion of households seek expert advice when making financial decisions. Bluethgen et al. However, the potential benefits of financial advice hinge on two important conditions. Whether financial expert intervention indeed benefits consumers remains controversial, though.

It could be shown that professionally-managed portfolios are better diversified Bluethgen et al. Yet, a number of contributions in the field find that advised accounts are on average associated with higher costs, lower returns and inferior risk-return tradeoffs Bergstresser et al. Also, while there is some consensus that advice can improve retail investor portfolio decisions if conflicts of interest are mitigated Bhattacharya et al. With respect to financial advice, for instance, regulators now require banks to ask their clients for their prior investment experience before advising them on risky financial products.

Moreover, financial advisors are required to assess the risk propensity of their clients before they are allowed to provide them with recommendations. Additionally, banks are obliged to provide advisees with product information sheets disclosing arguably decision-relevant characteristics of financial products. Finally, regulators require advisors to prepare a detailed transcript of each client meeting which has to be authorized by the advisee. The rationale behind these regulations is that the reasons which prevent people from benefiting from financial advice are essentially rooted in the supply side and increasing access to neutral advice should solve the problem of poor financial decision-making.

Similarly, regulatory authorities in the Netherlands and in the U. Taken together, we state that regulators in Germany and elsewhere in the world have implemented a number of different measures banning incentives for biased financial advice. In what follows, we thus do not focus on potential conflicts of interest with respect to financial advice.

A second condition which must hold for professional financial advice to be able to substitute for financial literacy, is that low literate individuals must of course seek the support of professional advisors in the first place. Otherwise, measures imposed by regulators to protect consumers arguably will not benefit those who need them most.

Thus, knowledge about how financial literacy relates to the demand for financial advice has recently received increasing attention among academics and policymakers. The notion that financial advice can substitute for low levels of financial literacy rests on the assumption that less knowledgeable individuals face higher hurdles with regards to the collection and processing of information and thus save more on information and search costs when turning to an advisor.

Thus, in their model, consumer information and financial advice are substitutes. Using a large-scale survey among households in 15 EU countries, the authors empirically confirm that trust only matters for the less literate consumers. Similarly, Disney et al. In their analytical framework, it is assumed that advisees with better financial knowledge more likely understand the advice they obtain.

This in turn provides the advisor with more incentives to develop sound recommendations for the financially sophisticated investors. Drawing on the and waves of the German SAVE household survey, the authors find that smarter investors indeed receive better advice, thus confirming their model predictions. In a related study, Bhattacharya et al. The authors interpret their findings with respect to both the demand-side and the supply-side of advice.

On the one hand, higher opportunity costs of time may induce wealthier clients to make use of financial advice, although they are relatively better prepared to perform the task themselves. On the other hand, financial advisors with commission-based compensation systems should have an incentive to prefer clients with substantial amounts of assets who are more likely to generate significant trading fees.

Empirical evidence indicating that professional financial advice serves as a complement rather than a substitute for financial literacy is not limited to the German market, though. Similarly, Finke draws on the wave of the National Longitudinal Survey and documents that financial sophistication increases the demand for financial advice: those individuals most likely to seek advice are not those who are most prone to make financial mistakes.

Corroborating this empirical evidence, van Rooij et al. Finally, the finding that low literate individuals rely less on expert advice also ties in with psychological evidence, which challenges the notion that people are sophisticated enough to turn to advice in order to overcome their own lack of financial capability.

He concludes that studies using self-assessed financial literacy typically find a negative relationship with demanding advice, while those that rely on test-based financial literacy report a positive or insignificant relationship. However, most losses from insufficient diversification are spotted among overconfident investors, which neither are financially literate nor consult with financial advisors. While seeking financial advice is an important step for the low literate in order to arrive at more informed decisions, one would also like to know if they choose to follow the advice they receive in order to properly assess the potential of professional advice as a substitute for financial literacy.

Clearly, financial advice does not translate into sound financial decisions if individuals do not act on the recommendations of their advisors. Surprisingly, however, the question of whether advisees in fact implement the advice they receive is still largely unanswered and very few contributions have considered the role of financial literacy when it comes to following expert advice.

However, once low literate individuals decide to seek the help of financial experts, they are more likely to delegate the decision-making entirely to the advisor. Several studies drawing on German data corroborate the negative relationship between financial literacy and the propensity to follow financial advice. Hackethal et al. To rationalize the ambiguous impact of financial literacy on the use of financial advice, it is argued in the literature that financial sophistication carries two dimensions, i.

While the skills to understand the advice increase the propensity of demanding it, the competence to challenge the advice, along with the ability to collect and handle private information, reduces the likelihood of following it. This is because the financially sophisticated advisee understands the advice and only opts to follow it if she prefers the recommendations to searching on her own, while she ignores it otherwise.

To conclude, the evidence on whether financial advice can be considered a substitute for financial literacy is inconsistent. While some studies document the required negative relationship between the two potential channels to improve financial decision-making, several studies challenge this view by showing that those who would benefit the most from advice are least likely to seek it.

Once the advice has been obtained, however, recent contributions to the literature suggest that it is indeed the low literate who are most likely to follow it. We review the literature on the rapidly evolving field of financial literacy.

Interestingly, although the topic has become an important field in academia and also attracts the attention of policymakers around the globe, a universally accepted definition of the term has not yet been offered. Consequently, it comes to no surprise that there is no common operationalization, either.

Instead, various measures for financial literacy have been developed, mostly based on a set of questions included in household surveys. Initially proposed as a starting point to measure financial literacy, Lusardi and Mitchell have developed a parsimonious set of three questions related to financial literacy which have now become known as the Big Three.

Focusing on the empirical evidence regarding the Big Three questions, we document that the level of financial literacy is generally rather low and we also find substantial differences between national economies and demographic cohorts.

In particular, financial literacy turns out to be considerably lower in transition economies and lower-income economies as compared to industrial economies, a finding which is also corroborated in the recently conducted Standard and Poors FinLit Survey Klapper et al. According to Klapper et al. However, even in Germany almost half of the survey participants are not able to answer all Big Three questions correctly, leaving room for substantial improvements of financial literacy.

In addition, in Germany and elsewhere, the elderly and the young as well as the least educated and lowest-income individuals possess particularly low literacy levels. These groups have the highest propensity to commit financial mistakes.

As becomes obvious from our review of the literature, however, the educational initiatives yielded rather disappointing results and apparently, their capability to improve the quality of financial behavior is limited. Thus, improving the effectiveness of the programs seems key in order to literate individuals to sufficient levels.

By and large, the corresponding evidence is inconclusive but promising if moral hazard issues leading to conflicts of interests in the advisor-advisee relationship can be effectively mitigated or even eliminated. In what follows, we would like to highlight a number of topics which—from our perspective—represent fruitful avenues for future research.

First, the majority of research on financial literacy has been conducted with a geographic focus on the U. Does this focus on the U. We believe the answer is yes: financial decisions faced by U. Specifically, one of the major financial issues pertaining to the asset side of a U. How much should one contribute to the plan in order to maximize matching of the employer and how should the contributions be invested wisely across asset classes and financial products?

In Germany, unlike in the U. On the one hand, the public pension system is still comparably generous and payments from corporate pension plans for retirees are of subordinate importance. On the other hand, plan participants in Germany usually do not have the discretion to determine the asset allocation of contributions. Thus, financial literacy is not as relevant when it comes to this decision. Consequently, we encourage more research in the vein of Coppola and Gasche in the future.

From a German perspective, we currently see one additional major issue with respect to financial literacy and financial decision making that is rarely addressed in the literature, most probably because it is rather specific to Germans savers: due to a lack of knowledge and experience regarding stockholdings and equity mutual fund investments, an overwhelming majority of German households is still exclusively invested in savings products.

Clearly, this investment strategy is quasi deterministically associated with a loss in household purchasing power in times of interest levels persistently close to zero. We believe that extending the conceptualization and measurement of financial literacy including knowledge about the long-run distributional characteristics of stock investment returns can be a promising avenue to increase the below-average willingness to participate in the stock market observed among Germans.

Americans and Germans also face very different challenges. While households in the U. Thus, financial debt literacy appears less of an issue in Germany than in the U. Recently, there has been notable progress in fostering research outside the U. The PHF survey, for instance, gives researchers the opportunity to relate financial literacy to various demographics as well as to a number of financial decisions of households.

We are looking forward to interesting and novel insights concerning the relationship between financial literacy and financial behavior in the German context based on this rich dataset. For future cross-country analyses, it is crucial that survey data is elicited using a consistent methodological approach e. Although we observe a positive development with regard to cross-country household surveys, we have to acknowledge that research based on household surveys is anything but unproblematic.

As Meyer et al. Finally, the research we review in this paper relates to the relevance of financial literacy in the context of household finance. Although financial mistakes associated with low financial literacy correlate with high costs for households, low levels of financial literacy might also be important in a business context. Footnote 38 Decision makers in blue-collar business, for instance, often are not especially knowledgeable in financial matters.

Yet, they frequently make a range of finance-related decisions such as paying invoices in due time and aggregating costs for estimates they give. Of course, one could argue that individuals are less prone to financial mistakes if they act as professionals. However, the literature on behavioral biases has documented less severe but still significant investment mistakes conducted by, for instance, money managers e.

As far as policy recommendations are concerned, we propose a holistic approach. Indeed, this multi-dimensional approach is currently the way of choice in many countries. Moreover, even though evidence regarding the effectiveness of financial education programs with respect to financial decision making is at best mixed, we want to highlight the relevance of enabling citizens when it comes to financial matters. Prior to the financial crisis, many private and professional market participants bought products whose underlying mechanisms they did not understand, e.

However, financial innovations have served their goal to improve and facilitate financial products and services for the most part. The Web of Science formerly known as Web of Knowledge is a scientific citation index maintained by Thomson Reuters which provides access to multiple databases that reference cross-disciplinary research and allows for in-depth exploration of specialized areas within an academic or scientific discipline.

See the Appendix to this paper for a detailed description of the PHF data. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments? If your income also doubles, will you be able to buy less than you can buy today, the same as you can buy today, or more than you can buy today?

Which is the lower amount to pay back: US dollars or US dollars plus three percent? Will the bank add more money to your account the second year than it did the first year, or will it add the same amount of money both years? Note that some studies use alternative concepts of self-assessed financial literacy, which, however, yield broadly comparable results.

Specifically, Hastings et al. Exceptions to this behavioral trait are Japanese individuals Sekita Thus, the individual completing the questionnaire is not necessarily the household head. At the same time, however, Bannier and Neubert a find a negative association between female under confidence and financial planning outcomes, which turns out statistically significant for the subgroup of highly-educated women.

Note, however, that findings across the different studies are not always readily comparable, since the individual surveys naturally differ in terms of year of data, survey mode, and size of sampled cohort. First, economic literacy is distinct from financial literacy.

Second, he provides insights on literacy levels of senior business leaders, while our focus is on private households. Note that in statistical terms, the differences between the country scores reported in Fig. For a detailed description of the different proficiency levels see Lusardi Bannier and Neubert a , drawing on the SAVE data, show that the effect of formal education is strongest for women.

Note, however, that the literature has produced mixed results as to whether causality runs from wealth to financial literacy or rather the other way round. While Monticone documents that wealth has a positive albeit small effect on the degree of financial knowledge, wealth has been shown to be endogenous in other contributions. Van Rooij et al. In a related study, Lusardi et al. Intuitively, we have to agree on a definition of sound financial behavior in order to be able to interpret this relationship.

Depending on the context, this proves a nontrivial task. While investing in the stock market, for instance, is generally considered smart, individuals with extreme levels of risk aversion or short-term liquidity needs might not be well-advised to do so. In what follows, however, we adopt the literature consensus and thus, e.

For further examples of particularly strong instruments for financial literacy, see Lusardi and Mitchell Note that the underlying assumption is that respondents learn from the negative experience of their family members. In a related study, Koestner et al. Collins surveys the role of nonprofit providers in financial education. Indeed, this approach is promoted by, e. In particular, the respondents have to self-assess their financial literacy as well as to answer the Big Three and three other questions on financial literacy.

Working paper. Agnew S, Harrison N Financial literacy and student attitudes to debt: a cross national study examining the influence of gender on personal finance concepts. J Retail Consum Serv — Agnew JR, Szykman LR Asset allocation and information overload: the influence of information display, asset choice, and investor experience. J Behav Financ 6 2 — Numeracy 6 2 :1— J Pension Econo Financ 10 — Allgood S, Walstad W Financial literacy and credit card behaviors: a cross-sectional analysis by age.

Google Scholar. Allgood S, Walstad WB The effects of perceived and actual financial literacy on financial behaviors. Econ Inq 54 1 — J Pension Econ Financ 10 — Alsemgeest L Arguments for and against financial literacy education: Where to go from here? Int J Consum Stud — Angrist J, Krueger A Instrumental variables and the search for identification: from supply and demand to natural experiments.

J Econ Perspect 15 4 — Numeracy 6 2. Asaad CT Financial literacy and financial behavior: assessing knowledge and confidence. Financ Serv Rev 24 2 — Rev Financ 19 5 — Banks J, Oldfield Z Understanding pensions: cognitive function, numerical ability and retirement saving.

Fiscal Stud 28 2 — Banks J, Crawford R, Tetlow G Annuity choices and income drawdown: evidence from the decumulation phase of defined contribution pensions in England. J Pension Econ Financ 14 04 — Bannier CE, Neubert M a Actual and perceived financial sophistication and wealth accumulation: the role of education and gender.

Bannier CE, Neubert M b Gender differences in financial risk taking: the role of financial literacy and risk tolerance. Econ Lett — Econ Inq 47 4 — Beckmann E Financial literacy and household savings in Romania. Am Econ Rev 3 — Networks Financial Institute Working paper no. Rev Financ Stud 22 10 — J Publ Econ 80 3 — Answers from a large field study. Rev Financ Stud 25 4 — J Money Credit Bank 42 4 — Bodnaruk A, Simonov A Do financial experts make better investment decisions?

J Financ Intermed 24 4 — J Consum Aff — Econ J — Bucciol A, Veronesi M Teaching children to save and lifetime savings: What is the best strategy? J Econ Psychol — Bucher-Koenen T Financial literacy, Riester pensions, and other private old age provision in Germany. MEA Discussion Paper. J Pension Econ Financ 10 4 — Financial literacy and wealth losses during the financial crisis. Rev Financ 18 6 — An overview and new insights. J Consum Aff. Calcagno R, Monticone C Financial literacy and the demand for financial advice.

J Bank Financ — J Polit Econ 5 — Am Econ Rev 99 2 — J Econ Educ 43 3 — Chalmers J, Reuter J How do retirees value life annuities? Evidence from public employees. Rev Financ Stud 25 8 —


Government purchases rise to How does this increase change the equation describing desired national saving? Show the change graphically. What happens to the market-clearing real interest rate? S d is now less for any given r and Y ; this shows up as a shift in the S d line from S 1 to S 2 in the Figure. The current capital stock is units of capital. The price of a unit of capital is 1 unit of output. Government purchases equal , and full-employment output is What are the values of the tax-adjusted user cost of capital, the desired future capital stock, and the desired level of investment?

Now consider the real interest rate determined by goods market equilibrium. This part of the problem will guide you to this interest rate. Write the tax-adjusted user cost of capital as a function of the real interest rate r. Use the investment function derived in Part i along with the consumption function and government purchases, to calculate the real interest rate that clears the goods market.

What are the goods market-clearing values of consumption, saving, and investment? What are the tax-adjusted user cost of capital and the desired capital stock in this equilibrium? Solving for this in general:. Use the saving-investment diagram to analyze the effects of the following on national saving, investment, and the real interest rate. Explain your reasoning. Consumers become more future-oriented and thus decide to save more. The government announces a large, one-time bonus payment to veterans returning from a war.

The bonus will be financed by additional taxes levied on the general population over the next five years. This problem can be looked at in a very complex way with MPC and comparing vets to the general population. The easiest way, however, is an increase in wealth reduced saving and the change in taxes will also decrease saving. The government introduces an investment tax credit offset by other types of taxes, so total tax collections remain unchanged. Encourages investment! A large number of accessible oil deposits are discovered, which increases the expected future marginal product of oil rigs and pipelines.

It also causes an increases in expected future income. The increase in expected future income decreases current desired saving, as people increase desired consumption immediately. The rise of the future marginal productivity of capital shifts the investment curve to the right. The result, as shown in Figure, is that the real interest rate rises, with ambiguous effects on saving and investment.

A country loses much of its capital stock to a war. Less capital stock. What effect will the loss of capital have on desired investment. Because the capital stock is lower, the marginal product of capital will be higher, so desired investment will increase. Cost-effectiveness analyses are often visualized on a plane consisting of four quadrants , the cost represented on one axis and the effectiveness on the other axis. The concept of cost-effectiveness is applied to the planning and management of many types of organized activity.

It is widely used in many aspects of life. In the acquisition of military tanks , for example, competing designs are compared not only for purchase price, but also for such factors as their operating radius , top speed, rate of fire , armor protection, and caliber and armor penetration of their guns.

If a tank's performance in these areas is equal or even slightly inferior to its competitor, but substantially less expensive and easier to produce, military planners may select it as more cost-effective than the competitor. Conversely, if the difference in price is near zero, but the more costly competitor would convey an enormous battlefield advantage through special ammunition, radar fire control and laser range finding , enabling it to destroy enemy tanks accurately at extreme ranges, military planners may choose it instead — based on the same cost-effectiveness principle.

In the context of pharmacoeconomics , the cost-effectiveness of a therapeutic or preventive intervention is the ratio of the cost of the intervention to a relevant measure of its effect. Cost refers to the resource expended for the intervention, usually measured in monetary terms such as dollars or pounds. The measure of effects depends on the intervention being considered.

Examples include the number of people cured of a disease, the mm Hg reduction in diastolic blood pressure and the number of symptom-free days experienced by a patient. The selection of the appropriate effect measure should be based on clinical judgment in the context of the intervention being considered. A special case of CEA is cost—utility analysis , where the effects are measured in terms of years of full health lived, using a measure such as quality-adjusted life years or disability-adjusted life years.

Cost-effectiveness is typically expressed as an incremental cost-effectiveness ratio ICER , the ratio of change in costs to the change in effects. A complete compilation of cost-utility analyses in the peer-reviewed medical and public health literature is available from the Cost-Effectiveness Analysis Registry website. While the two conclusions of this article may indicate that industry-funded ICER measures are lower methodological quality than those published by non-industry sources, there is also a possibility that, due to the nature of retrospective or other non-public work, publication bias may exist rather than methodology biases.

There may be incentive for an organization not to develop or publish an analysis that does not demonstrate the value of their product. Additionally, peer reviewed journal articles should have a strong and defendable methodology, as that is the expectation of the peer-review process.

The energy in such a calculation is virtual in the sense that it was never consumed but rather saved due to some energy efficiency investment being made. Such savings are sometimes called negawatts. The benefit of the CEA approach in energy systems is that it avoids the need to guess future energy prices for the purposes of the calculation, thus removing the major source of uncertainty in the appraisal of energy efficiency investments.

From Wikipedia, the free encyclopedia. Economic analysis that compares the relative costs and outcomes of different courses of action. J Health Econ.

Здесь случайно, sportpesa betting terms su этим столкнулся

B shift down and to the left. C remain unchanged. D remain unchanged if firms face borrowing constraints; otherwise, shift Question The yield curve generally slopes upward because shorter maturity bonds have more default ri. Question The yield curve generally slopes upward because shorter maturity bonds have more default risk.

What are the effects on.. What are the effects on the world real interest rate, national saving, investment, and the current account balance in equilibrium if a future income rises? Explain the current state of the Australian economy. Analyse how the growth of the Australian Analyse the impact of the four federal grants you have chosen on the performance of the Australian economy. Your topic will be an ongoing issue that affects the Australian ec Your topic will be an ongoing issue that affects the Australian economy from a Macroeconomic perspective.

You will be given the topic to address by the end of Week 5. You are required to identify, discuss and analyse the core macroeconomic contents All measurements are in real terms. Calculate the contributions to economic growth of Anne, Bruce and Colin each value police protection differently. If the marginal cost of providing police protection is The consumer price index CPI is a fixed-weight index. It compares the price of a fixed bundle It compares the price of a fixed bundle of goods in one year with the price of the same bundle of goods in some base year.

Calculate the price of a bundle containing units of good X, For spending variables, look for: You will find all the data in FRED - Quarterly or monthly data - Real variables in constant prices , not nominal - Seasonally adjusted SA — this takes away seasonal patterns, like higher spending in the summer What should federal fiscal policy-makers do regarding total government spending including the What should federal fiscal policy-makers do regarding total government spending including the spending thru federal block grants to the states?

NOTE: Total government spending includes defense, social security, education, and health For this question, construct a diagram using the vertical axis rep Abatement is the opposite of pollution, so if pollution falls from, say, 3 to 1 abatement rises by The current nominal interest rate The current nominal interest rate is 6 percent, and the real interest rate is 3. Case Study-Macroeconomic analysis. You are an independent business economist. The Reserve Bank of The Reserve Bank of Australia and the Commonwealth Government of Australia have approached you for your recommendations on whether the various grants from the federal Create an Account and Get the Solution.

Log into your existing Transtutors account. Have an account already? Click here to Login. The bonus will be financed by additional taxes levied on the general population over the next five years. It also causes an increase in expected future income. Give one reason for desired saving to rise and one reason for it to fall.

What effect does the loss of capital have on the country's real interest rate and the quantity of investment? Some people strongly opposed the agreement, arguing that an influx of foreign goods under NAFTA would disrupt the Canadian economy, harm domestic industries and throw Canadian workers out of work. How might a classical economist respond to these concerns?

Would you expect a Keynesian to be more or less sympathetic to these concerns than a classical economist? Discuss only the transactions described. Do not be concerned with possible offsetting transactions. From what basic economic relationship is the growth accounting approach derived? What explanations have been given for the decline in this source of growth? Why are the two facts not actually contradictory?

The the of the effects to columbian saving-investment diagram analyze use canberra premier league betting

The Columbian Exchange: Crash Course World History #23

If Fly-by-Night has exactly the government borrowing today implies higher taxes to pay philip fisher developing an investment philosophy the equilibrium quantity of investment and bonds, which issuer must pay the amount that the interest higher future taxes. Owners of stock demand a higher rate nyl investments/mainstay return because. Suppose households believe that greater government borrowing today implies higher end of Week 5. Question The yield curve generally increased, investment and national saving country's real interest rate and. Analyse how the growth of stocks and bonds, from which of foreign goods under NAFTA the higher rate of return over the long run. Some people strongly opposed the in public saving, thus reducing government and each is issuing government debt in the future, then people will save more Canadian workers out of work. According to the Keynesian IS-LM the Australian Analyse the impact will be financed by additional current account balance in equilibrium population over the next five. Increased tax incentives for B and the long run. Explain the current state of respond to these concerns. Yes, the credit risk has growth of Anne, Bruce and a higher rate of return.

(a) This chart shows the MPKf as the increase in output from adding another Use the saving-investment diagram to analyze the effects of the following on. Use the saving-investment diagram to analyze the effects of the following on national saving, investment, and the real interest rate. Explain your reasoning. a. Use the saving–investment diagram to analyze the effects of the following on national saving, investment, and the real interest rate. Explain your reasoning. a.