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Financial fragility and financial optimism linkage during COVID-19: Does financial literacy matter?

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  • Chhatwani, Malvika
  • Mishra, Sushanta Kumar

Abstract

COVID-19 and its consequences induced many challenges for individuals, and many of them experienced financial fragility. Financial optimism is crucial in this situation as it helps individuals and organizations recover from such situations. We argue that financial fragility has a long-term consequence on individuals and examined the adverse effect of financial fragility on financial optimism. Using a nationally representative dataset from the USA, we tested if financial literacy could minimize financial fragility's adverse impact on financial optimism. We found a negative linkage between financial fragility and financial optimism; the linkage was stronger for women. To address potential endogeneity, we conducted robustness analyses using instrumental variable regression and propensity score matching. The findings of the study provide implications to increase financial optimism during the pandemic.

Suggested Citation

  • Chhatwani, Malvika & Mishra, Sushanta Kumar, 2021. "Financial fragility and financial optimism linkage during COVID-19: Does financial literacy matter?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 94(C).
    • Handle: RePEc:eee:soceco:v:94:y:2021:i:c:s2214804321000914
    DOI: 10.1016/j.socec.2021.101751
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    Cited by:

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    2. Al-Omoush, Khaled Saleh & Gomez-Olmedo, Ana M. & Funes, Andrés Gómez, 2024. "Why do people choose to continue using cryptocurrencies?," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
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    4. Azra Zaimovic & Anes Torlakovic & Almira Arnaut-Berilo & Tarik Zaimovic & Lejla Dedovic & Minela Nuhic Meskovic, 2023. "Mapping Financial Literacy: A Systematic Literature Review of Determinants and Recent Trends," Sustainability, MDPI, vol. 15(12), pages 1-30, June.

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