Measuring responsible financial consumption behaviour

Sound consumption decisions determine individuals’ well‐being; responsible financial consumption behaviour (RFCB) affects not only their finances but also their societal status and emotional state. The failure to manage personal finances responsibly may result in serious long‐term consequences for individuals and society overall. In order to evaluate the concept of RFCB, this study combines two established theoretical frameworks—the family management system and the theory of planned behaviour. The paper investigates the relationships among RFCB, responsible financial attitudes, financial literacy and behavioural control. Its theoretical model is tested on a random sample of 494 respondents and analysed using PLS‐SEM. The results confirm the formation of responsible consumption behaviour by six formative elements: self‐control in spending, planning for the future, seeking information, education, rational decision‐making and solvency. The findings also indicate that all three focal variables have a direct effect on RFCB.     

Quantitative easing and median income: a state-level analysis

Due to the Great Recession, the Federal Reserve engaged in unconventional monetary policy (QE) to fight the effects of the economic downturn. Literature asserts that QE did have impacts on economic growth and helped alleviate the effects of the recession. Recently, critics have asserted that the benefits of QE may not have been equally distributed across households. In this paper, we build a state-level dataset to investigate the dynamics of QE measures and median income across the U.S states. The findings indicate that, for the period 2008 to 2014, there is statistical evidence that increases in the Federal Reserve’s balance sheet correspond with higher nominal median income. However, once we adjust for inflation, the results become statistically insignificant and the impact of QE on median income becomes almost zero.     

Household Debt,Consumption, and Income Inequality

Using the Johansen and Engle–Granger cointegration tests, we show that there is one cointegrating relationship between household debt, consumption, and income inequality in the United States for the period from 1929 to 2009. Given this result, we use a Vector Error-Correction model to further understand the dynamics among the three variables. Results indicate that increases in income inequality and consumption directly contribute to increases in household debt. Interestingly, the results reveal some feedback from household debt to income inequality. We also show that debt-driven consumption should be viewed with caution as the results show that increases in household debt correspond with future declines in the rate of consumption.     

Theoretical underpinnings of consumers’ financial capability research

This paper investigates the multidisciplinary theoretical context of financial capability and provides a critical examination of 14 relevant theoretical frameworks. To this end, the paper defines financial capability and develops a new theoretical framework of financial capability termed the personal financial management system. Financial capability is defined as the capacity of consumers to undertake comprehensive financial activities and thereby achieve personal financial well-being. The exploration of financial capability includes the concepts of financial literacy and psychological financial capability, where the latter represents automatic and controlled mental processes. Recent advances in behavioural science have profoundly changed the realm of personal finances, and it is, therefore, essential to acknowledge the importance of the intuitive reasoning that shapes our financial decision making. As part of the financial management system's throughput, together with individual motivation and opportunity within the personal financial management system, financial capability forms financial behaviour. The framework identifies three groups of relevant antecedents of financial capability including sociodemographic factors, cognitive and affective factors and personality and values. By constructing a comprehensive theoretical model, this paper contributes to the literature by providing greater consistency in the definitions of capability and its related terms, encouraging academic discussion and affirming the much-needed directions for future research.