Research On The Impact Of Financial Literacy On Family Debt Based On CFPS

In recent years,with the rapid development of domestic credit market and the change of residents' consumption concept,the issuance of personal loans has increased year by year.And the level of household debt has risen rapidly.According to official statistics,the ratio of household debt to GDP is close to 50%.In addition,the most important reason for the outbreak of the subprime mortgage crisis in the United States in 2007 is the unreasonable debt of households.The unreasonable debt may be due to the low level of financial literacy of residents.Therefore,more and more countries are aware of the importance of improving the financial literacy of their residents,and more and more scholars begin to pay attention to the impact of financial literacy on household debt behavior.Through reading a large number of documents,it is found that the domestic research on the relationship between financial literacy and household financial behavior has achieved remarkable results.But the research on the relationship between financial literacy and household debt is rare.In addition,domestic scholars have not studied the impact of financial literacy on the cost of household liabilities,however the cost of liabilities is also an important factor affecting household living standards.Therefore,on the basis of relevant literature,this paper enriches the research content and determines the research direction.Based on the CFPS,this paper uses factor analysis method to construct the core explanatory variable financial literacy indicators.The control variables include household characteristics such as total income and demographic characteristics of household heads.Interpreted variable household debt is measured by three indicators:household ownership debt,debt path and debt cost.Since household ownership debt and debt path(whether through formal financial institutions such as banks)are fictitious variables and debt cost is continuous variable,this paper uses discrete model Probit and ordinary least squares method(OLS)to examine finance.We can draw the following conclusions from the above empirical results: there is a significant positive correlation between financial literacy and household debt.This also shows that the higher the financial literacy,the more likely the household is to smooth household consumption expenditure through the credit market;There is a significant positive correlation between financial literacy and family preference for lending through financial institutions such as banks.The higher the financial literacy,the lower the cost of household debt.The possible reason is that households with higher financial literacy are more aware of their debt-servicing costs and more likely to calculate loan interest correctly.Because households may improve their financial literacy by participating in the credit market,there may also be measurement errors and missing variables.So the model may have endogenous.To solve this problem,this paper introduces instrumental variables to test whether the model has endogenous.It is found that the instrumental variables are valid and the model is endogenous,that is to say,financial literacy is an endogenous variable.But the results of two-stage regression further prove that financial literacy can increase household debt,increase the possibility of residents' loans through financial institutions and reduce the cost of household financing.Finally,according to the conclusions drawn from the empirical analysis,this paper puts forward relevant suggestions from the national macro-perspective and the family micro-perspective:Financial supervisors and educational departments shouldjointly formulate strategies.Financial supervisory departments are responsible for formulating and planning the overall strategy of financial education and organizing its implementation.Education departments are responsible for integrating financial education into the educational system of schools or training institutions,so as to promote the popularization of financial education in China;Families should pay attention to the cultivation of financial literacy and the learning of loan-related knowledge to reduce the risk of loans and the cost of debt.