Abstract
• We analyzed macroeconomic literacy using insights from behavioral economics. • The concept of loss aversion and the concept of mental accounting were used as indicators of rational/irrational thinking. • GEE model was used for data analysis to capture within-subjects' correlations. • Our data implies that students with high academic achievements and who are prone toward mental accounting are more macroeconomically literate. We analyze macroeconomic literacy by insights from behavioral economics, while incorporating individual differences in gender, cognitive ability and academic institution. Our sample consists of economic students from two academic institutions in Israel. For statistical analysis, we used Generalized Estimating Equations (GEE). Our main finding is that high-level male students who are prone toward mental accounting have very accurate expectations of inflation, interest rate and unemployment, i.e. they are highly macroeconomic literate. Yet, we found no indication that rational thinkers are more literate than others.
Published Version
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