Third-Party Loan Guarantees: Measuring Literacy and its Effect on Financial Decisions

Arbeitspapier

Granting a third-party guarantee for a loan does not directly involve a financial transaction. Therefore, guarantors might not understand that they are taking on a liability, albeit contingent. We introduce literacy about guarantees as a novel and distinct aspect of financial literacy. For ten Eastern European countries, we find that 45 percent of individuals lack this form of financial literacy. Instrumenting individual guarantee literacy with regional cohort-specific financial literacy, we show that guarantee literacy significantly reduces the probability of acting as a guarantor. Our results are robust to a placebo analysis and several sensitivity checks.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 237

Classification and Topics

• Classification: Wirtschaft ; Household Saving; Personal Finance
• Subject: Third-party loan guarantees ; guarantee literacy ; financial literacy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Beckmann, Elisabeth ; Hainz, Christa ; Reiter, Sarah
• Event: Veröffentlichung
• (who): Oesterreichische Nationalbank (OeNB)
• (where): Vienna
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/264829
• Last update: 10.03.2025, 11:44 AM CET