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Financial literacy, financial development and economic growth

Author

Listed:
  • Spyridon Boikos

    (University of Macedonia, Greece)

  • Theodore Panagiotidis

    (Department of Economics, University of Macedonia, Greece)

  • Georgios Voucharas

    (Liverpool Hope University, UK)

Abstract

While significant progress has been made in exploring the importance of financial literacy, its impact on economic growth and financial development from a macroeconomic point of view, remains thinly understood. This paper provides fresh evidence on the relationship between financial literacy, financial development and economic growth. We utilise a novel dataset for 61 countries over the period 1999-2014 and employ a panel quantile regression model. We provide strong evidence that higher financial literacy levels lead to higher GDP per capita growth and the size of the impact is higher at lower quantiles of the conditional growth distribution. As financial development increases, its positive impact on economic growth diminishes, indicating an inverted U-shaped relationship. High levels of financial literacy mitigate the diminishing returns of financial development on GDP per capita growth by an average of 7.41%. Interestingly, in higher quantiles of the conditional growth distribution, the mitigating effect increases to 9.23%.

Suggested Citation

  • Spyridon Boikos & Theodore Panagiotidis & Georgios Voucharas, 2025. "Financial literacy, financial development and economic growth," Working Paper series 25-09, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:25-09
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    Keywords

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    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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