Financial literacy, financial development and economic growth

Spyridon Boikos (), Theodore Panagiotidis and Georgios Voucharas ()
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Spyridon Boikos: University of Macedonia, Greece
Georgios Voucharas: Liverpool Hope University, UK

Working Paper series from Rimini Centre for Economic Analysis

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%.

Keywords: Financial Literacy; Financial Development; Economic Growth; Quantile Regression; Panel Data (search for similar items in EconPapers)
JEL-codes: C21 C23 G10 G53 O16 O40 (search for similar items in EconPapers)
Date: 2025-10
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:25-09

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