Measuring Financial Knowledge: A Macroeconomic Perspective

Abstract

Building an indicator which measures countries’ financial knowledge allowing comparisons between them and throughout time is the objective of this paper. Currently, this is a lack in this research field, whose previous works were oriented to microeconomic analysis using survey that not only covered interviewees’ financial knowledge but also some of their individual characteristics (e.g. race, ethnic, gender, age, among others). Perhaps that is why there is empirical evidence about the effect of this knowledge on matters such as saving and retirement planning, stock market participation, product and services choice, or over-indebtedness, for example. But its effects on economic variables like development and inequality (among others) have hardly been explored. Therefore, the longitudinal design of our Financial Knowledge Index might contribute to turn definitively towards the macroeconomic perspective in this incipient research field. Our results are consistent with previous works and reveal those countries which have more robust and more mature financial system (some of them have financial matters in their school curricula) register better positions respect with the rest of them.