2023 (20), №1

Irrational Decision-Making in Behavioural Finance Models and the Success of the National Monetary Policy

For citation: 

Didenko, V. Yu. (2023). Irrational Decision-Making in Behavioural Finance Models and the Success of the National Monetary Policy. AlterEconomics, 20(1), 271–290. https://doi.org/10.31063/AlterEconomics/2023.20-1.13

Abstract:

The development of an effective monetary policy and its successful implementation is one of the crucial problems for national governments and policy-makers. Among other things, the effectiveness of mone­tary policies are influenced by the level of financial literacy and culture in a given country. The study focuses on financial behaviour patterns in Russia and their influence on the country’s monetary policy. The study aims to investigate the behaviour patterns that need to be taken into account when devising and implementing the national monetary policy to ensure the desired outcomes, in particular, price stability. The study relies on the formalization method, which was used to systematize the behavioural patterns identified in different domains such as psychology, sociology and economics and to identify those patterns that are the most important for the successful implementation of a monetary policy. The study presents a critical analysis of the concept of financial behaviour, compares the main theories of human behaviour, and discusses the concept of irrational behaviour and its parameters. The question of special interest is whether it is possible to tackle the problem of cognitive distortions and make people’s financial decision-making more rational. The study also examines the methods of quantitative assessment of financial behaviour in monetary policy models and identifies the key factors affecting people’s financial behaviour and impeding the effective implementation of the national monetary policy.

PDF full
Downloaded: 107

Valentina Yu. Didenko — Cand. Sci. (Econ.), Associate Professor, Associate Professor of Department of Banking and Financial Markets, Financial University under the Government of the Russian Federation; https://orcid.org/0000-0002-4116-826X (49, Leningradsky Prospekt, 119334, Moscow, Russian Federation; e-mail: vydidenko@fa.ru).

Ajzen, I. & Fishbein, M. (1980).  Understanding Attitudes and Predicting Social Behavior.  New Jersey: Prentice-Hall, 278.

Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decisions Processes, 50 (2), 179–211. https://doi.org/10.1016/0749-5978(91)90020-T

Ajzen, I. (2002).  Constructing a theory of planned behavior questionnaire.  Unpublished manuscript. Retrieved from: http://people.umass.edu/aizen/pdf/tpb.measurement.pdf (дата обращения: 20.11.2022).

Akerlof, G. A. & Shiller, R. J. (2009).  Animal spirits: How human psychology drives the economy, and why it matters for global capitalism. Princeton, NJ: Princeton University Press, 248.

Akerlof, G. A. (2005). Povedencheskaya makroekonomika i makroekonomicheskoe povedenie [Behavioral macroeconomics and macroeconomic behavior].  Mirovaya ekonomicheskaya mysl’. Skvoz’ prizmu vekov. v 5 tt. [World economic thought. Through the prism of centuries. In 5 vols.]. Vol. 5. Book 2. Moscow, Russia: Mysl’ Publ., 444–483. (In Russ.)

Anselmi, D. L. & Law, A. L. (1998).  Questions of Gender: Perspectives and Paradoxes.  Boston: McGraw Hill, 800.

Bandura, A. (1989). Human agency in social cognitive theory. American Psychologist, 44 (9), 1175–1184. https://doi.org/10.1037/0003-066X.44.9.1175

Borisov, A. Yu. (2018). Prikladnaya povedencheskaya ekonomika: asimmetrichnyy paternalizm, libertarianskiy paternalizm i «podtalkivaniya» [Applied behavioral Economics: asymmetric Paternalism, libertarian Paternalism and “nudges”]. Chapter 41.  Georgiy Valentinovich Plekhanov: zhizn’, deyatel’nost’, osmyslenie tvorcheskogo naslediya [Georgy Valentinovich Plekhanov: life, activity, comprehension of creative heritage]. In F. L. Sharov, G. P. Zhuravleva (Eds.). Moscow, Russia: International Institute of Economics and Law, 460–496. (In Russ.)

Deaux, K., (1985). Sex and Gender.  Annual Review of Psychology, 36,  49–81.

DiClemente, C. C. & Prochaska, J. O. (1982). Self-change and Therapy Change of Smoking Behavior: A Comparison of Processes of Change in Cessation and Maintenance. Addictive Behaviors, 7 (2), 133–142. DOI: 10.1016/0306-4603(82)90038-7.

Didenko, V. Yu. (2021). Osobennosti modeley finansovogo povedeniya cheloveka [Features of models of human financial behavior].  Finansovaya ekonomika [Financial Economy], 3,  295–297. (In Russ.)

Fishbein, M. & Ajzen, I. (1975).  Belief, attitude, intention, and behavior: An introduction to theory and research.  Reading, MA: Addison-Wesley.

Gigerenzer, G. (2020). How to explain behavior? Topics in Cognitive Science, 12 (4), 1363–1381. https://doi.org/10.1111/tops.12480

Hrubes, D., Ajzen, I. & Daigle, J. (2001). Predicting hunting intentions and behavior: An application of the theory of planned behavior. Leisure Sciences, 23, 165–178. http://dx.doi.org/10.1080/014904001316896855

Isaakyan, S. A. & Amerhanova, N. A. (2011). Kross-kul’turnyy analiz vzaimosvyazi monetarnykh attityudov i individual’nykh tsennostey [Cross-cultural analysis of the relationship between monetary attitudes and individual values].  Tsennosti kul’tury i modeli ekonomicheskogo povedeniya [Cultural Values and Models of Economic Behaviour].  Moscow, Russia: Sputnik+, 238–253. (In Russ.)

Janz, N. K. & Becker, M. H. (1984). The Health Belief Model: A decade later. Health Education Quarterly, 11 (1), 1–47. DOI: 10.1177/109019818401100101.

Jing Jian Xiao (2008). Applying Behavior Theories to Financial Behavior. Handbook of Consumer Finance Research, 69.

Jorgensen, C. (2007). Image access, the semantic gap, and social tagging as a paradigm shift. Advances in Classification Research Online. DOI: https://doi.org/10.7152/acro.v18i1.12868.

Kapeliushnikov, R. I. (2013). Povedencheskaya ekonomika i novyy paternalism [Behavioral economics and the new paternalism]. Working Paper WP3/2013/03. Moscow, Russia: Publishing House of the Higher School of Economics, 76. (In Russ.)

Makasheva, N. A. (2011). Das Keynes Problem»: ot «Traktata o veroyatnosti» k «Obshchey teorii zanyatosti, protsenta i deneg» [Das Keynes Problem].  Obshchestvennye nauki i sovremennost’ [Social Sciences and Contemporary World], 6,  143–154. (In Russ.)

Marr, D. (1977). Artificial intelligence — A personal view. Artificial Intelligence, 9 (1), 37–48. https://doi.org/10.1016/0004-3702(77)90013-3

Marwell, G. & Ames, R. E. (1981). Economists free ride, does anyone else? Experiments on the provision of public goods, IV. Journal of public economics,15 (3), 295–310.

Musgrave, R. A. (1987). Merit Goods. In J. Eatwell, M. Milgate, P. Newman (Eds.). London-Basingstoke: The New Palgrave, 452–453.

Ozmete, E. & Hira, T. (2011). Conceptual analysis of behavioral theories / models: Application to financial behavior. European Journal of Social Sciences, 18 (3), 386–404.

Pavlenko, O. B. (2011). Individual’nye tsennosti i modeli ekonomicheskogo povedeniya [Individual values and models of economic behavior.]. Tsennosti kul’tury i modeli ekonomicheskogo povedeniya [Cultural Values and Economic Behavior Models]. Moscow, Russia: Publishing House “Sputnik+”, 151–165. (In Russ.)

Prochaska, J. O. & Velicer, W. F. (1997). The Transtheoretical Model of Health Behavior Change. American Journal of Health Promotion, 12 (1), 38–48. https://doi.org/10.4278/0890-1171-12.1.38

Prochaska, J. O. (1994). Strong and Weak Principles for Progressing from Precontemplative to Action on the Basis of Twelve Behaviors. Health Psychology, 13 (1), 47–51. https://doi.org/10.1037//0278-6133.13.1.47

Redding, C. A., Rossi, J. S., Rossi, S. R., Velicer, W. F. & Prochaska, J. O. (2000). Health Behavior Models.  The International Electronic Journal of Health Education, 3,  180–193.

Rubenstein, A. Y. (2017). Ratsional’nost’ & irratsional’nost’: evolyutsiya smyslov [Rationality & irrationality: evolution of the senses]. Zhournal Novoi ekonomicheskoi assotsiacii [The Journal of the New Economic Association], 1 (33), 146–151. https://doi.org/10.31737/2221-2264-2017-33-1-7 (In Russ.)

Rubenstein, A. Y. (2019). Pochemu odni teorii ne poluchayut priznaniya, a drugie imeyut uspekh: «Meritornyy paternalizm» R. Masgreyva i «Libertarianskiy paternalizm» R. Talera [Why Are Some Theories Not Recognized, While Others Are Succesful? «Meritorious Paternalism» of R. Musgrave and «Libertarian Paternalism» of R. Thaler]. Ekonomicheskiy zhurnal VShE [Higher School of Economics Economic Journal], 23 (3), 345–364. https://doi.org/10.17323/1813-8691-2019-23-3-345-364 (In Russ.)

Shevyakov, A. & Kiruta, A. (2002).  Izmerenie ekonomicheskogo neravenstva. [Measuring economic inequality].  Moscow, Russia: Leto, 317. (In Russ.)

Shiller, R. J. & Akerlof, G. A. (2010). Spiritus Animalis, ili Kak chelovecheskaya psikhologiya upravlyaet ekonomikoy i pochemu eto vazhno dlya mirovogo kapitalizma [Animal spirits: How human psychology drives the economy, and why it matters for global capitalism]. Translated from English by D. Priyatkin. In A. Suvorov (Eds.).; Introduction by S. Guriev. Moscow, Russia: LLC «United Press», 273. (In Russ.)

Shockey, S. S. & Seiling, S. B. (2004). Moving into Action: Application of the Transtheoretical Model of Behavior Change to Financial Education. Financial Counseling and Planning, 15 (1), 41–52.

Simon, H. A. (1955) A behavioral model of rational choice. The Quarterly Journal of Economics, 69 (1), 99–118. https://doi.org/10.2307/1884852

Simon, H. A. (1957).  A Behavioral Model of Rational Choice. Models of Man, Social and Rational: Mathematical Essays on Rational Human Behavior in a Social Setting.  New York: Wiley.

Smith, A. (1759). The theory of moral sentiments. Edinburgh: A. Millar, and A. Kincaid and J. Bell.

Sushko, E. Yu. (2017). Finansovoe povedenie naseleniya i ego determinanty [Financial behavior of the population and its determinants]. Finansy i kredit [Finance and credit], 23 (12), 670–682. https://doi.org/10.24891/fc.23.12.670 (In Russ.)

Thaler, R. H. (1999). Mental Accounting Matters. Journal of Behavioral Decision Making, 12 (3), 183–206.

Tishin, A. (2020). Vliyanie demografii na razvitie finansovogo sektora Rossiyskoy Federatsii. Analiticheskaya zapiska [The impact of demography on the development of the financial sector of the Russian Federation. Analytic note], 21. (In Russ.)

Turocy, T. & Stengel, B. (2001).  Game Theory. CDAM Research Report LSE-CDAM-2001-09. Centre for Discrete and Applicable Mathematics, London School of Economics & Political Science, London, 12.

Voynova, V. Yu. (2019).  Statisticheskaya otsenka vzaimosvyazi ekonomicheskogo neravenstva i finansovogo povedeniya domashnikh khozyaystv [Statistical assessment of the relationship between economic inequality and financial behavior of households].  Thesis of Candidate of Economic Sciences. Rostov-on-Don, 255. (In Russ.)

Xiao, J. J. & Wu, J. (2006). Encouraging Behavior Change in Credit Counseling: An Application of the Transtheoretical Model of Change (TTM). SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.939434

Xiao, J. J., Newman, B. M. et al. (2004). Applying the Transtheoretical Model of Change to Consumer Debt Behavior. Financial Counseling and Planning, 15 (2), 89–100.

Xiao, J. J., O’Neill, B. et al. (2001). Application of the Transtheoretical Model of Change to Financial Behavior. Consumer Interests Annual, 47, 9.