Money illusion, financial literacy and implications of self-perceptions

Mehmet Celiktas and Neslihan Yilmaz

Applied Economics Letters, 2021, vol. 28, issue 6, 447-450

Abstract: Understanding inflation is crucial in financial decision-making, however, lack of comprehension pertains to money illusion. Using a survey applied to university students, we study the determinants of money illusion including financial literacy and education. Moreover, we test the implications of individuals’ self-perception of interest and knowledge in financial matters. Our findings show that a higher level of financial knowledge results in lower money illusion levels and education improves financial knowledge. Moreover, there exist self-perception biases; self-perceived levels might not always be in line with the actual ones, and there is a gender effect on self-perceptions.

Date: 2021
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DOI: 10.1080/13504851.2020.1761520

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