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.
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