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Financial Literacy and Consumer Financial Well-being in Ghana: Any Nexus with Economic Stability?

Matey, Juabin (2021): Financial Literacy and Consumer Financial Well-being in Ghana: Any Nexus with Economic Stability? Published in: International Journal of Arts and Humanities Studies (IJAHS) , Vol. 1, No. 1 (23 October 2021): pp. 14-22.

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Abstract

Despite persistent efforts to deal with life's economic challenges, most Ghanaians are financially insecure, making the pursuit of lifelong goals more difficult. Given these realities, financial literacy and consumer financial stability appear viable strategies for promoting economic stability. This is because financial literacy can serve as a conduit for informed financial decisions at both the household and macroeconomic levels. A high human development index is an indication of a better welfare of the citizenry in the country. As a result, linking household decisions to broader policy outcomes is inevitable. In this work, efforts are made to establish a link between financial literacy and consumer financial stability and their relationships with macroeconomic stability. One relevant finding is that financial literacy has a significant positive association with economic stability as measured by citizens' welfare. This discovery has several ramifications for national financial literacy initiatives. There appears to be an insignificant relationship between consumer well-being and economic stability, although positive. Nonetheless, it demonstrates how a financially secure consumer can boost aggregate demand by spending more, impacting job creation and macroeconomic growth. The Probit-Regression method facilitated data analysis using a participant population of 960 across eight studied regions in Ghana. Reasoning from these findings, national governments should take advantage of the favourable relationship between financial literacy and consumer financial stability on one hand, and national economic stability on the other seriously, as aggregate consumption volatility is lower in countries with a high level of financial literacy, which is reflected in individual saving and investment behaviour. As such, policy efforts should consider the relationship between microeconomic actions and macroeconomic outcomes since the former influences the latter.

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