Financial Literacy, Economic Development and Financial Development: A Cross-Country Analysis

Abstract

An adequate level of basic financial knowledge of the population contributes to achieving individual well-being, ensuring the stability of financial markets, and proper functioning of the economy. This paper aims to identify Romania’s position on financial literacy indicators, compared to other European countries, and to investigate the link between financial literacy, economic development, and financial development at a cross-country level. The findings reveal that Romania has the lowest level of financial literacy, although its income per capita is not the lowest in the European Union (EU). The low financial inclusion in Romania is strongly linked to inadequate financial education. Moreover, the population underestimates the benefits of long-term savings. These results challenge Romanian policymakers to develop effective financial education tools and programs, aimed at increasing financial awareness and financial literacy of population.

Keywords

• financial literacy
• economic development
• financial development
• romania
• european union