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Financial Literacy, Debt Burden and Impulsivity: A Mediation Analysis

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  • Cristina Ottaviani
  • Daniela Vandone

Abstract

After the 2008 crisis, EU regulatory authorities and policy makers started to devote resources to improve households’ financial literacy, considered as a key element of debt decisions. However, the role of another crucial determinant of debt burden has been neglected in such financial education programmes. The present study examines the role of impulsivity and financial literacy as predictors of debt burden in a sample of 445 individuals. An ad†hoc built indicator of financial literacy and scores on the Barratt Impulsiveness Scale were used as regressors. The debt service to income ratio, a proxy of debt burden, served as the dependent variable. Both predictors resulted associated with debt burden; however, impulsivity fully mediated the impact of financial literacy on debt, even after controlling for financial wealth. Findings are discussed in terms of policy implications and means to formulate more effective financial education programmes.

Suggested Citation

  • Cristina Ottaviani & Daniela Vandone, 2018. "Financial Literacy, Debt Burden and Impulsivity: A Mediation Analysis," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(2-3), pages 439-454, July.
    • Handle: RePEc:bla:ecnote:v:47:y:2018:i:2-3:p:439-454
    DOI: 10.1111/ecno.12115
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    2. Takuya Katauke & Sayaka Fukuda & Mostafa Saidur Rahim Khan & Yoshihiko Kadoya, 2023. "Financial Literacy and Impulsivity: Evidence from Japan," Sustainability, MDPI, vol. 15(9), pages 1-14, April.
    3. Khan, Habib Hussain & Kutan, Ali M., 2021. "Testing the structure-conduct-performance relationship for ASEAN: Addressing the issues in the panel mediation," Journal of Asian Economics, Elsevier, vol. 72(C).
    4. Robert Powell & Anh Do & Denise Gengatharen & Jaime Yong & Rasiah Gengatharen, 2023. "The relationship between responsible financial behaviours and financial wellbeing: The case of buy‐now‐pay‐later," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(4), pages 4431-4451, December.
    5. Galariotis, Emilios & Monne, Jerome, 2023. "Basic debt literacy and debt behavior," International Review of Financial Analysis, Elsevier, vol. 88(C).

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