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Constructing a Multidimensional Index for Financial Well-Being

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  • Jared Martin U. Desello

Abstract

This research presents a new index that measures financial well-being by incorporating three dimensions- financial confidence, financial resilience, and uncertainty. It employs a two-stage principal component analysis to come up with a single indicator for each representative economy, which is then ranked from highest to lowest. Thereafter, the author calculated the cross-country impact of the financial well-being index against poverty, income inequality, and unemployment. The results show that higher financial well-being tends to significantly correlate with better income distribution and lower incidence of poverty. Its relationship with unemployment is not statistically significant. We contend that financial well-being as a measure needs to be considered by policymakers and industry leaders as an indicator to evaluate the effectiveness of financial products and services in enabling financial resilience, confidence, and greater economic freedom towards individuals, going beyond financial inclusion.

Suggested Citation

  • Jared Martin U. Desello, 2025. "Constructing a Multidimensional Index for Financial Well-Being," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 17(1), pages 1-84, January.
    • Handle: RePEc:ibn:ijefaa:v:17:y:2025:i:1:p:84
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    References listed on IDEAS

    as
    1. Brüggen, Elisabeth C. & Hogreve, Jens & Holmlund, Maria & Kabadayi, Sertan & Löfgren, Martin, 2017. "Financial well-being: A conceptualization and research agenda," Journal of Business Research, Elsevier, vol. 79(C), pages 228-237.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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