| Monetary Policy and the Economy Q3/07 |
| Geldpolitik und Wirtschaft - Die auf Deutsch und Englisch erscheinende Quartalspublikation der OeNB analysiert die laufende Konjunkturentwicklung, bringt mittelfristige makroökonomische Prognosen, veröffentlicht zentralbank- und wirtschaftspolitisch relevante Studien und resümiert Befunde volkswirtschaftlicher Workshops und Konferenzen der OeNB. |
Monetary Policy and the Economy Q3/07 – chapters
Robust Economic Activity in the Euro Area
Breitenfellner, Elsinger, Vondra – Monetary Policy and the Economy Q3/07
Selected Central Banks’ Economic and Financial Literacy Programs
Fluch – Monetary Policy and the Economy Q3/07
Financial Capability of Austrian Households
Fessler, Martin Schürz, Wagner, Weber – Monetary Policy and the Economy Q3/07
Financial and Economic Education Products and Services of Austrian Institutions and Enterprises
Schlögl – Monetary Policy and the Economy Q3/07
Human Capital and Economic Growth – Summary of the 35th Economics Conference of the Oesterreichische Nationalbank
Janger, Raunig – Monetary Policy and the Economy Q3/07
Economic and Financial Education: Concepts, Goals and Measurement
Gnan, Silgoner, Weber – Monetary Policy and the Economy Q4/07
Editorial
Over the past years, economic policy institutions have stepped up their efforts to enhance economic and financial literacy. Government agencies, banks, nonprofit organizations and last but not least central banks have launched initiatives all over the world to introduce new financial and economic education programs or to broaden and deepen already existing products and services. Based on a comprehensive assessment of existing economic and financial literacy initiatives, international organizations like the OECD, the G-8 or the European Commission have identified best practices and have issued related
recommendations.
There are several reasons for the growing importance of economic and financial literacy programs. With the interplay of economic forces becoming increasingly complex, individuals need to develop a better and broader understanding of how the economy and financial markets work if they are to be well informed to make important personal decisions. Increasing financial wealth and the trend toward individual retirement planning have made investment skills an important asset for long-term life planning. At the same time, economic policymakers have an interest in having economic agents understand their economic policy measures. For example, for central banks to be able to fulfill their key tasks of ensuring price and financial stability, it is crucial that citizens are well informed about economic and financial issues. The OeNB has provided economic education products and services for decades, including a multitude of teaching materials, seminars for teachers and journalists alongside its economics publications. In its education efforts, the OeNB has always actively sought out cooperation with other education providers in Austria and, in recent years, has especially fostered cooperation with other euro area central banks. Against this background, this special issue of “Monetary Policy & the Economy” takes stock of economic and financial literacy at the national and international level. The contributions in this issue present and analyze the content and objectives of economic and financial education programs, the level of economic and financial knowledge in Austria, education products and services available in Austria as well as other central banks’ financial and economic literacy programs.
In the first study, Gnan, Silgoner and Weber examine concepts, goals and the measurement of economic and financial education. As the authors show, economic and financial education covers a very broad range of initiatives and activities. What knowledge areas and skills are targeted and how content is presented depends not just on the target group, but also on the different motives and goals of education providers. Central banks all over the world provide economic and financial education basically for five reasons: (1) to enhance the effectiveness of monetary policy, (2) to ensure the smooth functioning of financial markets, (3) to support sustainable, stability-oriented economic policies, (4) to promote economic and financial literacy as a public good, and (5) to build their reputation and promote their acceptance as competent state institutions useful for citizens.
Ideally, an empirical survey of the level of knowledge among the target group and an identification of important knowledge gaps should precede every education initiative. The results of such a survey help evaluate the effectiveness and efficiency of education initiatives, and they foster quality control and focused improvement of education initiatives. How adequate education measures are depends on the objective such measures are aimed at. Although this general principle makes obvious sense, it is not always observed. To demonstrate just how difficult it is to measure economic literacy, the authors use the best-known test, the test of economic literacy (TEL). A survey of the small number of recent surveys available for Austria shows that much remains to be done and that there is ample room for improvement of economic education in Austria. As a case in point, more than half the respondents of a survey conducted in 2006 rated their understanding of economic fundamentals in the
range between “rather bad” and “very bad.” Not surprisingly, graduates of upper secondary commercial schools (Handelsakademien) displayed the highest level of economic knowledge among secondary school students.
Fessler, Schürz, Wagner and Weber present an empirical survey of the Financial Capability of Austrian Households. “Financial capability” as used in this contribution is broader than the term “financial literacy.” While “financial literacy” emphasizes knowledge, understanding and awareness, “financial capability” stresses the relevance of attitudes (toward risks, specific financial operations, etc.), the application of knowledge in practice and decision-making. Based on a survey on financial capability conducted in 2004, four competence areas are examined, starting with managing money. 90% of respondents stated that they were always precisely informed about their financial situation. 45% of households kept a record of their finances; 80% stated that they always paid their bills immediately. 15% tended to overdraw their accounts. 43% of Austrians saved on a regular basis; only 15% stated that they would rather take out a loan than save for a long time to make a purchase. Generally, the propensity to manage one’s finances carefully was shown to increase slightly with age whereas there was hardly any correlation with income and education. The second topic was planning ahead. The share of households stating that they were putting money aside “for a rainy day” turned out to be roughly 85%. 82% of the households covered by the survey considered individual saving for retirement important. Private retirement provisions were shown to be considered more important among higher income and higher education groups; younger respondents deemed private old-age provision more important than older respondents did. Over half the respondents aged 30 to 60 stated that they had private pension savings. The third competence area covered was making financial decisions. The majority of Austrians continue to be risk averse in their savings decisions: only 16% of households own stocks, 11% own mutual fund shares. Just under half of all respondents check out various banks’ offers to find the best product, with the percentage rising among better-educated respondents. The fourth topic treated was getting financial advice and information. The most frequently used source of financial information by far is individual advice provided by respondents’ relationship bank (Hausbank) (69%). Advice by family members (31%), information provided by different banks (24%), advice by friends (23%), leaflets provided by banks (20%), information from newspapers (20%) and the Internet (19%) played a much smaller role. The number of information sources used declined with increasing age and rose with income and education level. In finance matters, respondents placed most confidence in the Austrian consumer affairs organization (Verein für Konsumenteninformation, 47%), banks and insurance companies (40%), the Chamber of Labor (33%) and the OeNB (24%); multiple responses were possible. 56% stated that they preferred to rely on individual advice from their bank’s account manager rather than on their own judgment. 59% of respondents said they enjoyed dealing with financial issues, 47% considered their knowledge about financial issues mediocre, 66% wished to have more information about financial issues, and 90% of respondents thought that financial education in Austria should be improved.
In the third contribution, Schlögl provides an overview of Financial and Economic Education Products and Services of Austrian Institutions and Enterprises, which reviews the financial and economic education initiatives of ten Austrian providers. The study reveals that the different programs are not well coordinated: Many areas are covered by several providers at once, while others are (sometimes completely) neglected. In particular, there is hardly any suitable material for primary schoolchildren, nor are enough educational products available that would be appropriate for the age group of 11- to 15-year-olds. As compulsory schooling in Austria is completed around the age of 15, for those students that do not continue to go to school past the age of 15, lower secondary school provides one last chance to learn important basic literacy skills and financial capabilities. Therefore, improvements in economic and financial education in Austria should focus more intensely on target groups which have been largely neglected up to now. Moreover, different providers’ activities should be better coordinated, and the available material should be better organized.
The last contribution, Selected Central Banks’ Economic and Financial Literacy Programs, authored by Fluch, takes us beyond the national level to review central bank initiatives worldwide. Some 30 central banks across the world provide partly quite comprehensive financial education products for different target groups, often in close cooperation with other institutions. Some central banks consider financial education a core competence. The main target groups of the information products are children, young people, students and teachers. In this context, multimedia and e-education packages are gaining ground on print products. Some central banks have invested considerable resources in the establishment of special visitor and education centers as well as money museums. However, central banks’ educational Internet resources differ extensively in scope and presentation. Generally, financial knowledge transfer appears to work best through simple media and products that are very strongly focused on individual benefit.
The OeNB’s stocktaking shows that there is considerable demand in Austria for economic and financial education initiatives. Above all, appropriate material for some important target groups, such as primary schoolchildren and compulsory school-age children, appears to be quite scant. Addressing the need for suitable education programs to fill the gap will require considerable efforts in the years to come. Improving cooperation and coordination, and organizing and merging the material available on common platforms, would help raise the quality of educational products and services and would make them more accessible to consumers. The OeNB will respond to the strong demand for economic education from the Austrian public by continuing its economic and financial education activities and by further improving its education products and services. In doing so, the OeNB will aim to complement the already available material optimally and to seek cooperation with other providers in Austria and in the European System of Central Banks. |
| ID: |
45737 |
| Author(s): |
Liebscher, Christl, Mooslechner, Gnan |
| Publication date: |
01/10/07 |
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Created: 14/07/10. Last changed: 14/07/10.
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