Who’s in? Household-targeted Government Policies and the Role of Financial Literacy in Market Participation

Maria Elena Filippin
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Maria Elena Filippin: Central Bank of Ireland and Uppsala University

No 05/RT/26, Research Technical Papers from Central Bank of Ireland

Abstract: This paper examines how household-targeted government policies influence financial market participation conditional on financial literacy, focusing on potential Central Bank Digital Currency (CBDC) adoption. Due to the lack of empirical CBDC data, I use the 2012 introduction of retail Treasury bonds in Italy as a proxy to study how financial literacy affects households’ likelihood to engage with a new government-backed retail instrument. Using the Bank of Italy’s Survey on Household Income and Wealth, I show that households with some but low financial literacy are more likely to participate in the Treasury bond market than other groups following the introduction of the new instrument. Based on these findings, I develop a theoretical model to study how financial literacy affects CBDC demand through portfolio choice - low-financially literate households with limited access to risky assets allocate more resources to CBDC, while high-financially literate households use risky assets to safeguard against income risk.

Keywords: Central Bank Digital Currency; Financial literacy; Government policies; Market participation; Treasury bonds. (search for similar items in EconPapers)
JEL-codes: E42 E58 G11 G18 G53 (search for similar items in EconPapers)
Date: 2026-04
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:wpaper:05/rt/26

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