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Debts and Savings from a Behavioral and Financial Literacy Perspective

Ekman, Nils LU (2013) NEKH01 20131
Department of Economics
Abstract
By extending the neo-classical economic framework to a behavioral and financial literacy level this thesis intends to give a better understanding for how individuals make decisions concerning loans and savings. I find there is a broad support for the notion that these extensions can explain why some individuals are overindebted and accumulate insufficient savings for their retirement. As a direct result, the permanent income hypothesis can be considered a rather blunt tool to model life-cycle consumption patterns. Further, educational programs are likely to help reduce some of the biased behavior and saving schemes can be developed to facilitate the behavioral anomalies. This will increase saving levels and thus, indirectly prohibiting... (More)
By extending the neo-classical economic framework to a behavioral and financial literacy level this thesis intends to give a better understanding for how individuals make decisions concerning loans and savings. I find there is a broad support for the notion that these extensions can explain why some individuals are overindebted and accumulate insufficient savings for their retirement. As a direct result, the permanent income hypothesis can be considered a rather blunt tool to model life-cycle consumption patterns. Further, educational programs are likely to help reduce some of the biased behavior and saving schemes can be developed to facilitate the behavioral anomalies. This will increase saving levels and thus, indirectly prohibiting over-consumption and overindebtness. (Less)
Please use this url to cite or link to this publication:
author
Ekman, Nils LU
supervisor
organization
course
NEKH01 20131
year
type
M2 - Bachelor Degree
subject
keywords
Behavioral biases, Behavioral economics, Savings ratio, Debt ratio, Financial literacy, Life-cycle consumption theory, Consumption smoothing
language
English
id
3808205
date added to LUP
2013-06-20 10:24:40
date last changed
2013-06-20 10:24:40
@misc{3808205,
  abstract     = {By extending the neo-classical economic framework to a behavioral and financial literacy level this thesis intends to give a better understanding for how individuals make decisions concerning loans and savings. I find there is a broad support for the notion that these extensions can explain why some individuals are overindebted and accumulate insufficient savings for their retirement. As a direct result, the permanent income hypothesis can be considered a rather blunt tool to model life-cycle consumption patterns. Further, educational programs are likely to help reduce some of the biased behavior and saving schemes can be developed to facilitate the behavioral anomalies. This will increase saving levels and thus, indirectly prohibiting over-consumption and overindebtness.},
  author       = {Ekman, Nils},
  keyword      = {Behavioral biases,Behavioral economics,Savings ratio,Debt ratio,Financial literacy,Life-cycle consumption theory,Consumption smoothing},
  language     = {eng},
  note         = {Student Paper},
  title        = {Debts and Savings from a Behavioral and Financial Literacy Perspective},
  year         = {2013},
}