Financial Literacy, Financial Development and Economic Growth

Panagiotidis, Theodore and Boikos, Spyridon and Voucharas, Georgios (2025) Financial Literacy, Financial Development and Economic Growth. International Journal of Finance & Economics. ISSN 1099-1158

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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%.

Item Type:	Article
Additional Information and Comments:	© 2025 The Author(s). This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Keywords:	Financial Literacy; Financial Development; Economic Growth; Quantile Regression; Panel Data
Faculty / Department:	Faculty of Business, Law and Criminology > Liverpool Hope Business School
Depositing User:	Georgios Voucharas
Date Deposited:	15 Oct 2025 15:12
Last Modified:	15 Oct 2025 15:12
URI:	https://hira.hope.ac.uk/id/eprint/4763

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