Does Financial Literacy Improve Financial Inclusion? Cross Country Evidence

Antonia Grohmann, Theres Klühs and Lukas Menkhoff

No 1682, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: While financial inclusion is typically addressed by improving the financial infrastructure we show that financial literacy, representing the demand-side of financial markets, also has a beneficial effect. We study this effect at the cross-country level, which allows to consider institutional variation. Regarding “access to finance”, financial infrastructure and financial literacy are mainly substitutes. However, regarding the “use of financial services”, the effect of higher financial literacy strengthens the effect of more financial depth. The causal interpretation of these results is supported by IV-regressions. Moreover, the positive impact of financial literacy holds across income levels and several subgroups within countries.

Keywords: Financial inclusion; financial literacy; financial institutions; financial development (search for similar items in EconPapers)
JEL-codes: D14 G2 O1 (search for similar items in EconPapers)
Pages: 72 p.
Date: 2017
New Economics Papers: this item is included in nep-fle
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Does financial literacy improve financial inclusion? Cross country evidence (2018)
Journal Article: Does financial literacy improve financial inclusion? Cross country evidence (2018)
Working Paper: Does Financial Literacy Improve Financial Inclusion? Cross Country Evidence (2018)
Working Paper: Does Financial Literacy Improve Financial Inclusion? Cross Country Evidence (2017)
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