Financial literacy and economic growth: How Eastern Europe is doing?

Pa÷sa, Adina Teodo a; Pica os e, Xose; Ghe ghina, Elena Mæadæalina A icle Financial li e acy and economic g ow h: How Eas e n Eu ope is doing? Economics: The Open-Access, Open-Assessmen Jou nal P o ided in Coope a ion wi h: De G uy e B ill Sugges ed Ci a ion: Pa÷sa, Adina Teodo a; Pica os e, Xose; Ghe ghina, Elena Mæadæalina (2022) : Financial li e acy and economic g ow h: How Eas e n Eu ope is doing?, Economics: The Open- Access, Open-Assessmen Jou nal, ISSN 1864-6042, De G uy e , Be lin, Vol. 16, Iss. 1, pp. 27-42, h ps://doi.o g/10.1515/econ-2022-0019 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/306059 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. 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I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ Resea ch A icle Adina Teodo a Pașa*, Xose Pica os e, and Elena Mădălina Ghe ghina Financial Li e acy and Economic G ow h: How Eas e n Eu ope is Doing? h ps://doi.o g/10.1515/econ-2022-0019 ecei ed Sep embe 17, 2021; accep ed Janua y 13, 2022 Abs ac : In his s udy, we aim o analyse financial li e acy as a d i e o financial wellbeing and economic g ow h in h ee o he mos ecen EU Membe S a es, namely Romania, Bulga ia, and C oa ia. Ou pa icula in e es in s udying mo e in-dep h hese h ee coun ies is gene- a ed by hei difficul pa hway in he ansi ion o he Eu o and economic con e gence on one side and by he limi ed analysis ca ied ou so a in ela ion o hem on he o he side. Va ious s udies indica e ha financial li e acy is associa ed wi h weal h accumula ion, and financial edu- ca ion can help achie e economic g ow h. To conduc he empi ical analysis, in his s udy, we ha e used p ima y da a p o ided by he OECD o ou specific esea ch pu - poses. The aw da a we e collec ed in a su ey ca ied ou in2019inse enSou hEas e nEu opeancoun ies eaching o e 1,000 esponden s o each coun y. We used wo-s age leas -squa es eg ession o es ou hypo- hesis and clus e analysis o compa isons among coun ies. Conclusions o ou esea ch e eal he main diffe ences be ween coun ies in e ms o financial li e acy and e e se causali y be ween financial li e acy and eco- nomic g ow h o he analysed coun ies. Finally, he s udy gi es some insigh s in o he u u e design o public policies on financial educa ion in hese coun ies. Keywo ds: financial li e acy, economic g ow h, labou ma ke JEL: G53, F43, J40 1 In oduc ion The de elopmen s in he educa ion sec o o coun ies ha e p o ed o ha e a posi i e impac on he economic g ow h o a socie y, as an inc ease in he educa ional le el o he indi iduals imp o es human capi al, which inc emen s he p oduc i i y o he wo ke s and ansla es in o an inc ease in he ou pu o he economy. In his s udy, we conside ha one o he mos impo an d i e s o economic g ow h is he financial educa ion o indi i- duals. Financial educa ion e e s o he unde s anding o he basic concep s o finance, which enables households o make financial decisions o limi he isks igge ed by changes in economic condi ions and ci cums ances. This is o say, financial educa ion is abou lea ning how o use money in o de o dec ease financial ulne - abili y by no o e spending o incu ing deb s. Financial li e acy (FL)combines he knowledge, a i udes, and beha iou necessa y o make sound financial decisions o achie e indi idual financial wellbeing (FW)(A kinson and Messy, 2012). A he mac oeconomic le el, FL can esul in a s onge household’s balance shee , which has a posi i e con ibu- ion o he economic g ow h o na ions by inc easing social inclusion and educing inequali ies. Some au ho s ha e analysed FL om diffe en pe spec i es –FL effec s on pe - sonal finance and economic ou comes (Lusa di & Mi chell, 2014), FL in he con ex o changing economic condi ions (Remund, 2010), and FL as a basis o achie e FW (A kinson & Messy, 2012). Ne e heless, acco ding o ou knowledge, e y ew o hem ha e ocussed hei analysis in-dep h on he Eas e n Eu opean Coun ies and on he impac FL has on he economic g ow h o hese coun ies. The main eason why we ha e conside ed in his s udy o analyse Romania, Bulga ia, and C oa ia, is ha hese coun ies joined he EU in he las 15 yea s, ha ing diffe en cul u es and, despi e hei inc easing g oss domes ic p oduc (GDP) g ow h a es, hei eal GDP pe capi a is s ill unde he EU-27 a e age. In addi ion, as hese h ee coun ies should con e ge owa ds he es o he EU Membe S a es, we ha e conside ed analysing in his s udy he co ela ion  * Co esponding au ho : Adina Teodo a Pașa, Depa men o Economics and Economic Policy, Facul y o Theo e ical and Applied Economics, Bucha es Uni e si y o Economic S udies, Bucha es 010374, Romania, e-mail: [email p o ec ed] Xose Pica os e: Depa men o Economics, Facul y o Economics and Business, Uni e si y o A Co uña, EDaSS Resea ch G oup, A Co uña 15071, Spain, e-mail: [email p o ec ed] Elena Mădălina Ghe ghina: Depa men o Economics and Economic Policy, Facul y o Theo e ical and Applied Economics, Bucha es Uni e si y o Economic S udies, Bucha es 010374, Romania, e-mail: [email p o ec ed] Economics 2022; 16: 27–42 Open Access. © 2022 Adina Teodo a Pașae al., published by De G uy e . This wo k is licensed unde he C ea i e Commons A ibu ion 4.0 In e na ional License. be ween FL and GDP g ow h as a p oxy o economic g ow h. The s udy o hese h ee Eas e n Eu opean Coun- ies (EU-3coun ies), which a e also EU coun ies, com- pa ed o some o he Sou he n Eas e n Eu opean Coun ies (specifically, Geo gia, No h Macedonia, Moldo a, and Mon eneg o),whicha enon-EU coun ies dese es o be u he analysed o highligh hei diffe ences a he mac oeconomic le el and hei ad ancemen s owa ds he economic con e gence wi h he EU high pe o me s. The main objec i e o his s udy is o highligh he impac FL a ainmen has on he economic g ow h in Romania, Bulga ia, and C oa ia by indica ing he diffe- ences be ween hese h ee EU coun ies wi h some o he Sou h-Eas e n Eu opean coun ies in e ms o FL and FW. Ou o iginal con ibu ion is ocused on he impo - ance o FL’s ole in he economic g ow h o coun ies om Eas e n Eu ope. The cu en COVID-19 pandemic ep esen s a es o esilience, which emphasises he ole o financial educa ion in he economic eco e y o coun ies. F om he side o he labou ma ke , he dec eases in sala ies o job losses igge income ulne- abili y, which could be alle ia ed by empowe ing indi i- duals wi h mo e financial confidence in managing hei money and he po en ial subsidies hey ecei e. Mo eo e , financial educa ion awa eness is impo an as i offe s he indi iduals he oppo uni y o con ibu e o hei FW, and i imp o es hei financial esis ance in eco e ing om financial shocks. This s udy is s uc u ed in ou pa s. The fi s pa co e s he heo e ical backg ound, which poin s ou he main aspec s ela ed o FL and economic g ow h, es ab- lishing he hypo hesis o he empi ical analysis. The second pa ou lines he esea ch me hodology based on he p ima y da a p o ided by he OECD. The hi d pa includes he main esul s de i ed om he analysis o he economic a iables, and i e eals some discussions de i ed om ou s udy. Finally, he ou h pa p esen s he conclusions o he s udy and indica es u u e di ec- ions o esea ch. 2 Li e a u e Re iew The concep o financial educa ion is conce ned wi h ans- e ing financial knowledge (FK) o indi iduals. Financial educa ion ep esen s he ool o inc ease he FL le el o indi iduals. Mo eo e , indi iduals should lea n how o p o ec hei pe sonal finances and eac in economic en i onmen s ha a e con inuously changing, con i- bu ing in his way o he economic g ow h o hei coun y. In his ega d, nowadays, mo e han in any o he pe iod, o ha e a s able employmen income becomes mo e difficul o he employees. Some au ho s (Bosha a, 2012)conside ha s ong household balance shee s can help g ow he economy. One o he ac o s ha igge he ins abili y in income a e he changes in wo k due o echnological p og ess. The changes esul ing om he adop ion o new echnologies conduc o ans o ma ions in he labou ma ke , leading o misma ches in he demand and supply o labou o ce. Thus, s ong imbalances appea , which can lead o highe unemploymen a es o lowe income o some ca ego ies o wo ke s (Acemoglu & Res epo, 2020;Ko inek &S igli z,2021). The effo s o employees o keep up wi h he echno- logical p og ess h ough aining and li elong lea ning (Bode & Gold, 2018)and wi h he isk ha some jobs will be eplaced by new echnologies (Wo ld Bank, 2019) gene a e income ins abili y. In his espec , i is impo an o no e ha he isk o eplacing he labou o ce wi h machine y is highe in he case o ou ine asks (Acemoglu &Res epo,2020)and, he e o e, easily p og ammed using code lines. The e o e, acco ding o some s udies (Chiacchio, Pe opoulos, & Pichles, 2018; G ae z & Michaels, 2018), he mos ulne able ca ego ies o employees in he echnological e a a e ep esen ed by young people and employees wi h low o medium educa ion. As he wo king income is influenced by bo h numbe o yea s o s udy and wo k expe ience (Saqib, Panezai, Ali, & Kaleem, 2016; Wannak ai oj, 2013),wecanconside ha employees ecei ing low incomes a e o en in a posi ion o e ain hemsel es in o de o a oid si ua- ions whe e hey will no find a job. This si ua ion may place ulne able g oups in difficul y. The e o e, we s ongly belie e ha FL has he d i e o help wo ke s o e come un o eseen, less a ou able financial si ua ions. The ans o ma ion o wo k is also ep esen ed by he de elopmen o he gig economy o pla o m wo k, which is a o m o employmen ha uses digi al pla o ms as a place whe e he demand and supply o wo k a e mee ing (Eu o ound, 2018a). This is o say, i ep esen s a new ype o ee labou ma ke , whe e he wo ke s a e like mic o-en e p ises, e e y wo ke becoming esponsible o he /his income and financial plans (Huang, Mo gan, & T inh, 2019). In he case o he wo k on he pla o m, income is no s able, as wo ke s ca y ou asks acco ding o he needs o he applican a a p ice ag eed by he wo pa ies. Mo e han ha , he wo k on he pla o m is ans o - ming he ela ionship be ween he employee and he employe in he way wo k is o ganised (Eu o ound, 2018a). 28 Adina Teodo a Pașae al. Mo eo e , he condi ions and he egula ions on he labou ma ke , as well as he s abili y o income, a e s ongly affec ed (Eu o ound, 2018b). The economy o he pla o m in ol es he lack o social insu ance, heal h insu ance, and annual lea e, and wi hou he exis ence o an employ- men con ac . This means ha he employee–employe ela ionship akes a new o m, simila o collabo a ion, in exchange o an amoun o money. In his way, he wo ke s ha e o manage hei income in o de o co e he cu en and u u e expenses. The e o e, due o he ins abili y in income ha wo ks on he pla o m may igge , FL o indi iduals plays a key ole o add ess he decline in hei pe sonal income. The ins abili y in income ep esen s an effec o unce ain economic si ua ions. Fo example, ecessions a e gene a ing a significan dec ease in employmen income. The e o e, in o de o cope wi h income ins abili y, he impo ance o FL is inc easing. Basic financial educa ion is conside ed he fi s line o de ense agains in e up- ions in income (OECD, 2020). Mo eo e , some au ho s indica e ha financial shocks ha e long-las ing effec s unde mining economic g ow h (Ghosh ay, Mon o , & O dóñez, 2020). An example in his sense is he mos ecen economic con ex caused by he COVID-19 pandemic. Because o he es ic i e measu es and he empo a y closu e o economic ac i i ies, a significan pa o he businesses has aced an un a ou able economic si ua ion esul ing in a ecession. Fo example, manu ac u ing indus ies we e affec ed by he COVID-19 pandemic due o he con- ainmen measu es, which o ced he numbe o wo ke s o be limi ed in o de o a oid agglome a ions, and, second, hey aced sho - e m supply p oblems (De Ve , Nigohosyan, Núñez Fe e , G oss, Kuehl, & Flickenschild, 2021). The sec o s mos affec ed by he pandemic in Eu ope we e he cul u al and c ea i e indus ies sec o s, HORECA, and anspo . The effec s o he COVID-19 pan- demic on he economy ha e sp ead, leading o a dec ease in he wo ld p oduc ion o 4.3% in 2020 (UN DESA, 2021). This is o say, he impac o he COVID-19 c isis was h ee imes highe han he financial c isis in 2008. This si ua ion has igge ed dec eases in wages o e en mo e job losses, which is eflec ed in he decline o he popula ion’s FW and an inc eased unemploymen a e. Acco ding o es ima es o he In e na ional Labou O ganiza ion (ILO), globally, i was egis e ed a all in o al hou s o wo k by 8.8% compa ed o 2019, as a esul o he employmen loss (shi o unemployed o inac- i i y)and he educ ion o wo king hou s o some ca e- go ies o wo ke s (ILO, 2021). A he Eu opean Union le el, i has been egis e ed a dec ease o employmen income by 4.8% in 2020 (Eu opean Commission, 2020). Asa esul o economicandfinancial insecu i y,indi iduals who do no coun wi h a basic le el o financial educa- ion can easily become a ic im o financial aud (OECD, 2020). The e o e, we conside ha indi iduals who sco e significan ly in FL could assimila e be e finan- cial shocks ac oss economies. Mo eo e , FL co ela es s ongly wi h financial esilience (Deme zis, Domínguez- Jiménez, & Lusa di, 2020). Se e al s udies highligh he impo ance o FL, which can be unde s ood as a specific aining o indi iduals (Lusa di & Mi chell, 2014). High FL le els o indi iduals igge highe incomes and sa ings in hei households (Disney & Ga he good, 2013). Some au ho s (Calcagno & Mon icone, 2015)conside ha financial educa ion is necessa y o make he igh financial decisions. Mo e han ha , o he au ho s men ion he impo ance o p o- iding financial educa ion be o e indi iduals engage in cos ly financial ansac ions (Lusa di, Mi chell, & Cu o, 2010), and some s udies emphasize he significance o financial educa ion om an ea ly age, indica ing ha i con ibu es o indi idual FW and i suppo s inclusi e g ow h (Ba saikhan & Deme zis, 2018). Fo example, in an analysis o de eloped and de eloping coun ies om Asia, Eu ope, and he Uni ed S a es o Ame ica o he in e al 1980–2007, some au ho s (Lo P e e, 2018)ha e demons a ed he s a is ically significan in e se ela ion- ship be ween FL and income inequali y. In he same way, o he au ho s (Monsu a, 2020) each he same conclusion in hei s udy o he Philippines. On he o he hand, FL p oduces effec s a mac oeco- nomic le el, con ibu ing o he s abili y o he financial ma ke s and o he economic g ow h and economic de elop- men o coun ies (Ehigiamusoe & Lean, 2019; Ke ela, 2011). Fo ins ance, G ohmann, Klühs, and Menkhoff (2018)ca ied ou an analysis on 119 coun ies, which had diffe en le els o economic de elopmen , including some om he leas de eloped coun ies in he wo ld, such as A ghanis an and Mali, and some om he mos de eloped economies, such as Denma k and Finland. Acco ding o hei esul s, he e is a significan ela ion- ship be ween he le el o FL o indi iduals and hei financial inclusion. In his ega d, he mac oeconomic effec s a e clea and undoub ul: a highe FL le el o indi iduals has he capaci y o con ibu e o hei finan- cial de elopmen , which is posi i ely co ela ed wi h he economic de elopmen o hei coun ies. Ano he ad an age, which also ep esen s a con i- bu ion o he economic de elopmen and o he inc ease Financial Li e acy and Economic G ow h in Eas e n Eu ope 29 o FL le el o indi iduals, is he imp o emen o people’s capaci y o ace mac oeconomic shocks (Klappe , Lusa di, &Panos,2013). This co ela ion is highligh ed in esea ch based on he esponses o Russian indi iduals ha we e in e iewed du ing May 2008 and June 2009, meaning he pe iod o he G ea Recession. The e o e, we can say ha a highe le el o FL o indi iduals, on one hand. Con ibu es o mac oeconomic s abilisa ion, and, on he o he hand, i has he capaci y o mi iga e he nega i e effec s o an un a ou able economic con ex , helping ou he economy o eco e as e . Mo eo e , a mo e ecen s udy unde lines he same conclusion. Cla k, Lusa di, and Mi chell (2020), ollowing a su ey on 2,889 adul s be ween 45 and 75 yea s old in he Uni ed S a es o Ame ica, concluded ha people wi h a highe le el o FL, due o he decisions hey made in he p e-pandemic pe iod, encoun e ed less financial difficul ies du ing he COVID-19 pandemic pe iod. As ega ds he de eloping coun ies, i is necessa y o suppo he small and medium-sized en e p ises, and he FL has a eal con ibu ion o be e access o ex e nal financing, hus leading o he suppo o he companies’ g ow h p ocess (Bu chi, Włoda czyk, Sz u o, & Ma elli, 2021; Hussain, Salia, & Ka im, 2018). These effec s a e also egis e ed a mac oeconomic le el h ough economic g ow h. In addi ion, p e ious s udies based on su ey da a collec ion o 17 economies in Asia and he Pacific ha e indica ed ha financial educa ion is a key elemen o suppo economic g ow h (OECD, 2019). Mo eo e , o he c oss-coun ies panel eg essions (Le ine, 2005; Popo , 2018)poin ed ou ha financial measu es a e posi i ely co ela ed wi h economic g ow h. Fu he mo e, ecen s udies highligh ha financial educa ion con i- bu es o economic g ow h wi hin he Eu opean Union (Eu opean Bank Au ho i y, 2020). Howe e , as se e al s udies indica e, i is no only educa ion ha con ibu es o economic g ow h, bu he e e se causali y also exis s. This is o say, economic g ow h is s ongly impac ed by educa ion, in pa icula , by he knowledge and skills o people (Hanushek & Wößmann, 2010),and,a hesame ime,economicg ow hsuppo s educa ion as he economy can spend mo e on educa- ion. Fo example, o Bangladesh, an unde de eloped coun y in Asia, bu which was p oposed by he Uni ed Na ions o join he de eloping coun ies s a ing om 2026, a s udy was ca ied ou using da a o he pe iod 1976–2003, which highligh ed he bidi ec ional causali y o educa ion and GDP (Islam, Wadud, & Islam, 2007). In ano he s udy, F ancis and Sunday (2006) e ealed ha coun ies wi h highe pe capi a g oss na ional income eco d highe in es men s in educa ion. Mo eo e , a ecen s udy (Xu, Hsu, Meen, & Zhu, 2020)iden ifies he ela ion- ship be ween highe educa ion, economic g ow h, and inno- a ion abili y, whe e he h ee elemen s suppo each o he . Howe e , as Hanushek and Wößmann (2010)a gue, he impac o educa ion on economic g ow h is influenced by he quali y o educa ion, and i is impo an ha educa ion in schools is aligned wi h he needs o he popula ion. Based on he scien ific li e a u e, we conside financial educa ion as an impo an componen o educa ion nowadays, which con ibu es o bo h FW o indi iduals and o he economic g ow h o coun ies. Despi e he benefi s o FL a bo h mic oeconomics and mac oeconomics le els, all coun ies, ega dless o hei le el o de elopmen , ha e a low le el o li e acy. This issue can be ound bo h in de eloped coun ies, such as he Uni ed S a es, Japan, and Ge many, and also in de eloping coun ies, such as Romania (Lusa di & Mi chell, 2014). Thus, we can conside ha he le el o FL does no necessa ily depend on he le el o de elopmen o he coun y. Howe e , acco ding o he esea ch esul s men- ioned p e iously in his s udy, we expec ha he FL o indi iduals ep esen s a ac o ha indi ec ly con ibu es o he economic g ow h o coun ies. The e o e, he no el y o ou s udy compa ed o he p e ious s udies consis s in ou pa icula in e es o analyse mo e in de ail he ela ionship be ween he le el o FL and economic g ow h in he h ee mos ecen Eu opean Union Membe S a es (Romania, Bulga ia, and C oa ia), which a e subjec o pe manen sc u iny gi en hei aspi a ions owa ds he Eu ozone and Schengen acces- sion. Bo h Eu ozone and Schengen membe ship has p o ed o offe significan economic benefi s o hei pa icipa ing coun ies. The o he Eas e n Eu opean coun ies such as Poland, Hunga y, Se bia, Slo akia, o he Czech Republic a e no included in he cu en ana- lysis o wo easons. The fi s eason is ha Romania, Bulga ia, and C oa ia, al hough hey ha e achie ed high economic g ow h a es in he las yea s com- pa ed o he es o he Eas e n Eu opean coun ies (Wo ld Bank, 2021), hey a e s ill lagging behind he Eu opean Union’s op pe o me s. The second eason is due o he una ailabili y o ecen p ima y da a o he FL componen s (financial knowledge (FK),financial beha iou (FB),andfinancial a i ude (FA)) as ega ds he mos de eloped Eas e n Eu opean coun ies. 30 Adina Teodo a Pașae al. 3 Me hodology and Model Specifica ion 3.1 Da a Fi s , o conduc he empi ical analysis o FL, we used he p ima y da a p o ided by he OECD o ou specific esea ch pu poses. The e o e, he da a on FL in ou s udy a e no a ailable as open-sou ce, and hei owne ship belongs o he OECD. The OECD collec ed he da a on FL ia a su ey ca ied ou du ing July 2019 and Oc obe 2019 in se en Sou h Eas e n Eu opean coun ies: Romania, Bulga ia, C oa ia, Geo gia, No h Macedonia, Moldo a, and Mon eneg o. Second, o e i y he ela ionship be ween FL and economic g ow h, we ook in o accoun he GDP g ow h a e in 2019 (annual exp essed in pe - cen age epo ed on he p eceden yea ) om he Wo ld Bank open sou ce da abase. In o de o ca y ou he analysis be ween FL and economic g ow h as ega ds he coun ies subjec o ou s udy, we selec ed he da a co esponding o 2019, he yea when he su ey occu ed o FL. Theques ionnai e o he awda aonFLcompo- nen s (FK, FA, and FB)and FW was based on he OECD/ In e na ional Ne wo k o Financial Educa ion (INFE) oolki o measu ing FL and financial inclusion (OECD, 2018). The oolki ensu es he alidi y o he ins umen s used ac oss all se en coun ies analysed in his s udy, and i can be e ie ed om h ps://www.oecd.o g/financial/ educa ion/2018-INFE-FinLi -Measu emen -Toolki .pd . In addi ion, he ques ionnai e in ol es ou i ems, namely FK, FA, FB, and FW. All i ems we e measu ed as ollows: FK, 0–7 scale; FA, 1–5 scale; FB, 0–9 scale; and FW, max. 20 poin s o ag ee, disag ee, and neu al, as indica ed in Table 1. Mo eo e , he OECD/INFE oolki offe s a homo- genous app oach in analysing FL a he in e na ional le el, and se e al s udies (Bongini, Iannello, Rinaldi, Zenga, & An onie i, 2018; De Beckke , De Wi e, & Van Cam- penhou , 2019; De Cle cq, 2019)ha e used i success- ully in hei esea ch. The o al sample size o he popula ion is N=7,422. In addi ion, he selec ed a iables o desc ip i e s a is ics a e shown in Tables 1 and 2. Table 1 p o ides a summa y o he demog aphic p o- files o he esponden s. We ha e used desc ip i e s a is- ics o diffe en ia e he popula ion in he unc ion o gende , coun y, and g oup o coun ies. F om he o al numbe o 7,422 esponden s, 55.4% we e emale and 44.6% we e male. The esponden s we e g ouped in o wo ca ego ies: EU-3 coun ies (Romania, Bulga ia, and C oa ia)and non-EU coun ies (Geo gia, No h Mace- donia, Moldo a, and Mon eneg o). Fo each o he coun ies analysed in his s udy, he sample size is abo e 1,000 esponden s, and he confi- dence le el s ands a 95%. In Table 2, we ha e analysed he FL componen s, namely knowledge, beha iou , and a i ude, o which we ha e added he FW o indi iduals. Financial educa ion p omo es, in e alia, FW, which is di ided in o financial Table 1: Desc ip i e s a is ics by gende , coun y, and coun y g oup All Sou h-Eas e n coun ies F equency % Gende Female 4,109 55.4 Male 3,313 44.6 Coun y Romania 1,060 14.3 Bulga ia 1,047 14.1 C oa ia 1,079 14.5 Geo gia 1,056 14.2 No h Macedonia 1,076 14.5 Moldo a 1,074 14.5 Mon eneg o 1,030 13.9 Coun y g oup EU-3 coun ies (RO, BG, HR)3,186 42.9 Non-EU coun ies 4,236 57.1 Sou ce: Calcula ed by he au ho s based on OECD p ima y da a (2019). Table 2: Desc ip i e s a is ics o FL and FW All Sou h-Eas e n Eu opean coun ies Mean Median Mode S d. de ia ion FK sco e ( om 0 o 7)4.0 4.0 5.0 1.8 FB Sco e ( om 0 o 9)5.1 5.0 5.0 1.8 FA sco e ( om 1 o 5)2.8 2.7 2.3 0.9 FW sco e (max 20)8.7 9.0 10.0 4.7 EU-3 coun ies (RO, BG, HR)(N=3,186) Mean Median Mode S d. de ia ion FK sco e ( om 0 o 7)3.9 4.0 5.0 2.0 FB sco e ( om 0 o 9)5.1 5.0 5.0 1.9 FA sco e ( om 1 o 5)2.8 2.7 3.0 0.9 FW sco e (max. 20)9.4 10.0 10.0 4.4 Non-EU coun ies (N=4,236) Mean Median Mode S d. de ia ion FK sco e ( om 0 o 7)4.0 4.0 5.0 1.7 FB sco e ( om 0 o 9)5.1 5.0 5.0 1.8 FA sco e ( om 1 o 5)2.8 2.7 2.3 1.0 FW sco e (max 20)8.2 8.0 8.0 4.9 Sou ce: Calcula ed by he au ho s based on OECD p ima y da a (2019). Financial Li e acy and Economic G ow h in Eas e n Eu ope 31 secu i y and financial eedom o choice (Consume Financial P o ec ion Bu eau, 2015). 3.2 Me hodology In his s udy, he au ho s ha e conside ed choosing among he a iables he FL, as a wide ange o s udies (Fe nandes, Lynch J , & Ne emeye , 2014; Sunda asen, Rahman, O hman, & Dana aj, 2016)ha e indica ed ha FL has a significan posi i e effec on pe sonal finances o indi iduals, igge ing hei FW (Buche -Koenen, Alessie, Lusa di, & Van Rooij, 2021). Mo eo e , gi en he OECD/ INFE ini ia i es, which suppo policymake s o design and implemen na ional s a egies o financial educa- ion, he au ho s conside ed using in his s udy he dimension o FL based on he OECD (2016)defini ion. This defini ion b eaks down FL in o h ee componen s, namely FK, FB, and FA. FK ep esen s he knowledge and unde s anding o financial concep s (Kimiyaghalam & Sa a i, 2015; Remund, 2010). FB e e s o how people a e budge ing, sa ing, in es ing, e c. FA includes indi i- duals’p e e ences in ela ion o pe sonal finances (Johan, Rowlingson, & Appleya d, 2021)and includes hei a i- ude owa ds long- e m planning (OECD, 2015).As ega ds FW, in his s udy we ha e used he defini ion gi en by he Consume Financial P o ec ion Bu eau (2015), which con- side s FW as “a s a e o being whe ein a pe son can ully mee cu en and ongoing financial obliga ions, can eel secu e in hei financial u u e, and is able o make choices ha allow enjoymen o li e.”In addi ion, FW ep esen s a eflec ion o indi iduals’economic condi ions (Ru he o d &Fox,2010)and p o ec s indi iduals agains economic isks (Goldsmi h, 2000). In his sec ion, we analyse he h ee componen s o FL o he coun ies in ou sample wi h he aim o unde - s and he diffe ences in FW ac oss coun ies, which influ- ence hei socio-economic condi ions. The sea ch o causal ela ionships among he a i- ables ela ed o FL d i es mos o he au ho s o use eg ession analysis. In his espec , some au ho s ocused on logis ic o p obi eg ession models (Douissa, 2020; Khan, Pu hinun, Wa anapong anich, Yuk ada a, Uddin, & Kadoya 2021), whe eas o he au ho s used linea eg es- sions (Sha ma, A o a, Sinha, Akh a , & Meh a, 2021; Zah a & Ano aga, (2021). Ou s udy deals wi h wo-s age leas - squa es eg ession (2SLS)and, o his pu pose, we used STATA S a is ics so wa e, 13 h e sion. As ou aim is o emphasise in ou s udy he EU-3 coun ies, namely Romania, Bulga ia, and C oa ia, as EU Membe s S a es, he fi s s ep o ou analysis is o check whe he he e a e diffe ences among coun ies ha esul om he EU membe ship. In his espec , we compa ed he EU-3 coun ies wi h he es o Sou h-Eas e n Eu opean Coun ies o which p ima y da a we e a ai- lable. In addi ion, he second s ep was o find some causal ela ionships o he EU-3 coun ies. Conside ing he li e a u e e iew and ou objec i es, he hypo heses es ed in his s udy a e he ollowing: H1. FK is equal in all se en Sou h-Eas e n Eu opean coun ies, independen ly o hei belonging o he EU H2. FB is equal in all se en Sou h-Eas e n Eu opean coun ies, independen ly o hei belonging o he EU H3. FA is equal in all se en Sou h-Eas e n Eu opean coun ies, independen ly o hei belonging o he EU H4. FW is equal in all se en Sou h-Eas e n Eu opean coun ies, independen ly o hei belonging o he EU To con as he hypo heses om 1 o 4 in his s udy, we used a mean analysis compa ison, which is p e- sen ed in he ollowing ables. P e iously, we applied he Le ene es s o an equal a iance o iden i y he a iance equali y o he analysed g oups. The causal ela ionships o he EU-3 coun ies, which ep esen he ocus o ou pape , we e analysed acco ding o he ollowing hypo heses: H5. FB/FA/FK influences FW H6. FW posi i ely influences he GDP g ow h In o de o p o e he abo e ela ionships, we used he econome ic model desc ibed in Sec ion 3.3,o hiss udy. 3.3 The Model The con as o hypo heses H5 and H6 equi es analysing he exis ence o causal ela ionships in which wo endo- genous a iables in e ene: FW and GDP_G ow h. The defini ions o he wo independen a iables a e he ollowing: •FW = esponden s’opinion on elemen s ela ed o hei “s a e o being whe ein hey can ully mee cu en 32 Adina Teodo a Pașae al. and ongoing financial obliga ions, can eel secu e in hei financial u u e, and a e able o make choices ha allow enjoymen o li e”Consume Financial P o ec ion Bu eau (2015); •GDP g ow h =annual change in pe cen age poin s in a coun y’s economic ou pu o measu e how as a na ional economy is g owing. H5 s a es ha FB, FA, and FK influence FW. Unde his assump ion, we conside ed he ollowing: =+ + + +ββ β β U F WFBFAFK , iiiii 01 2 3 1(1) FW =Financial well-being FB =Financial beha iou FA =Financial a i ude FK =Financial knowledge whe e i=1,2,…,N, N =7,422 obse a ions Acco ding o H6, FW posi i ely influences GDP_ G ow h. Fu he mo e, we ha e conside ed ha bo h he in e cep and he angula coefficien o his equa ion could be diffe en in unc ion o he EU membe ship; he e o e, he p oposed equa ion is he ollowing: =+ + ++ αα α αU GDP_G ow h FW EUB EU_Well , iii ii 01 2 32 (2) GDP g ow h =G oss domes ic p oduc annual g ow h a e (%) FW =Financial well-being EUB =1 o EU coun ies and 0 o Non-EU coun ies. EU_Well =i is he p oduc o FW*EUB, and i is equal o 1 o EU coun ies and equal o 0 o Non-EU coun ies. whe e i=1,2,…,N,N=7,422 obse a ions. In his equa ion, EUB is a dummy a iable equal o 1 when he coun y belongs o he EU and equal o 0 when he coun y does no belong o he EU. Fu he mo e, EU_Well is a new a iable, which ep esen s he p oduc o FW by EUB, and i is equal o 1 when he coun y belongs o he EU and equal o 0 when he coun y does no belong o he EU. Gi en ha FW is he endogenous a iable o he fi s equa ion when p oposing he second one, we a e assuming he exis ence o unidi ec ional causali y be ween he wo a iables ha his model ies o explain, bu he possibili y o an in e se causali y be ween FW and GDP_ G ow h should also be analysed. This has a significan effec on FW since, in such a case, bo h he s uc u e o he model and he app op ia e es ima ion me hod would be diffe en . To analyse he possibili y o e e se causali y, GDP_ G ow h has been in oduced in he fi s equa ion as an addi ional explana o y a iable and, u he mo e, we ha e applied he Hausman es (Hausman, 1978; Hausman & McFadden, 1984), concluding ha he e is indeed an in e dependence be ween GDP_G ow h and FW; he e o e, a simul aneous equa ions model is p oposed. The desc ip ion o his model is as ollows: Equa ion (1): =+ + + ++ ββ β β βU FW FB FA FK GDP_G ow h , iiii ii 01 2 3 41 (3) FW =Financial well-being FB =Financial beha iou FA =Financial a i ude FK =Financial knowledge GDP g ow h =G oss domes ic p oduc annual g ow h a e (%) Whe e i=1,2,…,N,N=7,422 obse a ions. Equa ion (2): I emains as specified be o e: =+ + ++ αα α αU GDP_G ow h FW EUB EU_Well , iii ii 01 2 32 (2) GDP_G ow h =G oss domes ic p oduc annual g ow h a e (%) FW =Financial well-being EUB =1 o EU coun ies and 0 o Non-EU coun ies. EU_Well =FW*EUB is equal o 1 o EU coun ies and equal o 0 o Non-EU coun ies. 4 Resul s and Discussion The esul s o he mean compa ison we e conduc ed wi h a - es o wo independen samples by conside ing wo g oups. As indica ed abo e, G oup 1 is composed o he EU-3 coun ies (Romania, Bulga ia, and C oa ia), whe eas G oup 2 is composed o he es o he coun ies in he sample (namely,Geo gia,No hMacedonia,Moldo a, and Mon eneg o).Table3shows ha he Le ene es o equal a iances was applied, and i s esul s indica e ha i is no possible o assume equal a iance o any o he i ems analysed since in all i ems p- alue is below 0.05. The mean o each i em o bo h coun y g oups is p esen ed in Table 4. Table 2 indica es ha EU-3 coun ies ha e s a is i- cally diffe en means esul s o FK, FA, and FW. This shows ha hose s a is ically meaning ul diffe ences be ween EU-3 coun ies and he Non-EU coun ies ana- lysed in his s udy o FK, FA, and FW a e −0.106, 0.042, and 1.220, espec i ely, which indica e ha FK is highe in he Non-EU coun ies compa ed o he EU-3 coun ies. Financial Li e acy and Economic G ow h in Eas e n Eu ope 33 A he same ime, FA and FW a e mo e a ou able in Romania, Bulga ia, and C oa ia, as he means diffe ence is posi i e. FA ep esen s he a i ude o an indi idual owa ds money spending, aking in o accoun i s en i on- men . Some au ho s (He djiono & Damanik, 2016)s a e ha FA influences FB, whe eas some o he s (Riyazahmed, 2021) conside ha FB has a significan impac on FW. The e o e, his can explain he posi i e co ela ions be ween Romania, Bulga ia, and C oa ia in e ms o FA and FW. The esul s o he es s o hypo heses 1–4 a e p e- sen ed in Table 5. F om his analysis, we can each he conclusion ha o e all, FL and FB do no p esen disc e- pancies in none o he coun ies analysed in his s udy. Ne e heless, FK is highe in he non-EU coun ies compa ed o he EU-3 coun ies, whe eas FA and FW a e lowe in he non-EU coun ies compa ed o he EU-3 coun ies. Some s udies (Beckmann & Rei e , 2020)claim ha indi iduals who expe ienced economic u bulences wi h he ansi ion om planned o ma ke economies ha e highe FK abou infla ion. This could explain why FK is highe in he non-EU coun ies compa ed o he EU-3 coun ies in ou sample. Table 6 shows he gende analysis means compa i- sons o all coun ies in ou s udy and o he wo g oups o coun ies. Based on he gende analysis, we obse e some diffe ences, which also appea be ween he wo g oups o coun ies. The means diffe ences a e calcula ed be ween men and women (Tables 7–9). Table 3: Resul s o he - es o means compa ison I em Le ene’s es o equali y o a iances - es o equali y o means FSig. d Sig. (2- ailed)Mean diffe ence S d. e o diffe ence FK 104.661 0.000 (a) −2.405 6325.146 0.016 (c) −0.106 0.044 FB 4.413 0.036 (a) 0.913 6736.255 0.361 (b) 0.040 0.043 FA 13.510 0.000 (a) 1.955 7054.843 0.051 (d) 0.042 0.022 FW 71.196 0.000 (a) 11.320 7203.955 0.000 (c) 1.220 0.108 (a) Equal a iance canno be assumed, since -≤p alue 0.0 5 . (b) Equal means mus be assumed ( ->p alue 0.0 5 ). (c) Equal means canno be assumed ( -≤p alue 0.0 5 ). (d) Equal means could no be assumed o -≤p alue 0.1 , ha is, he means diffe ences could exis wi h 90% o p obabili y. Table 4: Desc ip i e s a is ics o i ems in H1 o H4, ega ding belonging o he EU G oup s a is ics I em Coun y g oup NMean S d. de ia ion S d. e o mean FK EU-3 coun ies 3,186 3.9350 1.97469 0.03498 Non-EU coun ies 4,236 4.0406 1.72563 0.02651 FB EU-3 coun ies 3,186 5.1142 1.87710 0.03326 Non-EU coun ies 4,236 5.0746 1.81574 0.02790 FA EU-3 coun ies 3,186 2.7986 0.89902 0.01593 Non-EU coun ies 4,236 2.7563 0.95320 0.01465 FW EU-3 coun ies 3,186 9.4203 4.36499 0.07733 Non-EU coun ies 4,236 8.2004 4.88471 0.07505 Sou ce: Calcula ed by he au ho s based on OECD p ima y da a (2019). 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