Constructing a Multidimensional Index for Financial Well-Being

Jared Martin U. Desello

International Journal of Economics and Finance, 2025, vol. 17, issue 1, 84

Abstract: This research presents a new index that measures financial well-being by incorporating three dimensions- financial confidence, financial resilience, and uncertainty. It employs a two-stage principal component analysis to come up with a single indicator for each representative economy, which is then ranked from highest to lowest. Thereafter, the author calculated the cross-country impact of the financial well-being index against poverty, income inequality, and unemployment. The results show that higher financial well-being tends to significantly correlate with better income distribution and lower incidence of poverty. Its relationship with unemployment is not statistically significant. We contend that financial well-being as a measure needs to be considered by policymakers and industry leaders as an indicator to evaluate the effectiveness of financial products and services in enabling financial resilience, confidence, and greater economic freedom towards individuals, going beyond financial inclusion.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:17:y:2025:i:1:p:84

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