Monte Carlo-Based Bayesian Path Analysis for Modeling Indirect Financial Effects on Literacy in Emerging Markets

Junianto Fachira Haneinanda, Fernandes Adji Achmad Rinaldo, Solimun Solimun and Astuti Ani Budi
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Junianto Fachira Haneinanda: Department of Mathematics, University of Brawijaya, Malang, Indonesia
Fernandes Adji Achmad Rinaldo: Department of Statistics, University of Brawijaya, Malang, Indonesia
Solimun Solimun: Department of Statistics, University of Brawijaya, Malang, Indonesia
Astuti Ani Budi: Department of Statistics, University of Brawijaya, Malang, Indonesia

Journal of Economic Integration, 2025, vol. 40, issue 4, 677-696

Abstract: Banking literacy is an important foundation in realizing financial inclusion, especially in developing countries such as Indonesia. This study examines the indirect effects of payment instrument use, financial inclusion, and financial capacity on banking literacy, with financial knowledge as a mediator. A Bayesian Parametric Path Analysis approach is used with estimation through Markov Chain Monte Carlo (MCMC) simulation. Primary data were obtained from a national survey of 600 respondents selected through multistage sampling. Results show that the three exogenous variables have significant indirect effects through financial knowledge, with credible intervals of all paths above zero. The Bayesian approach allows flexible estimation and probabilistic interpretation. The findings provide theoretical contributions and practical implications for financial education policies that support the digital transformation of banking services.

Keywords: Banking Literation; Financial Determinants; Indirect Effects; Bayesian Approach; Path Analysis (search for similar items in EconPapers)
JEL-codes: A20 C11 C52 C83 D83 E22 G53 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:021800

DOI: 10.11130/jei.2025009

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