The Role of Financial Literacy in Mediating the Relationship Between Inflation, Income Inequality and Saving Behavior in Dili-Timor-Leste (Case Study: Public and Private Sectors)
Abstract
This study investigates the intricate relationship between inflation, income inequality, financial literacy, and saving behavior among public and private sector employees in Dili, Timor-Leste. Recognizing the significant income disparity between these sectors, the research aims to address the pressing social and economic issues associated with low saving behavior. Through a questionnaire-based survey involving 355 respondents, the study employs a mixed-method approach to data analysis. The findings reveal several key insights. Firstly, the study found that inflation does not significantly influence saving behavior, but has positive impact on financial literacy among public and private sector employees in Dili, Timor-Leste. Secondly, contrary to expectations, income inequality does not directly affect saving behavior but has a positive impact on financial literacy. Thirdly, financial literacy significantly enhances saving behavior, bridging the gap between income groups and promoting economic stability. Lastly, financial literacy serves as a mediating factor, positively influencing saving behavior and mitigating the negative effects of both inflation and income inequality. These results underscore the critical role of financial literacy in shaping saving behavior and mitigating the impact of economic factors. The study contributes to understanding the unique economic dynamics of Dili, Timor-Leste, and offers insights for policymakers and stakeholders to develop targeted interventions aimed at promoting financial education and enhancing saving behavior among public and private sector employees.
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