Stability of financial inclusion determinants in emerging market economies: A dynamic coefficients approach

This paper addresses a significant gap in the existing literature on financial inclusion — namely, the dynamic instability of the impacts generated by its determinants in four major emerging market economies: Brazil, Russia, India, and China. A time-varying coefficients framework is applied to examine whether the factors shaping financial inclusion at the aggregate level produce nonlinear effects over time. The analysis covers the period from 2000–2001 to 2022–2023. A composite financial inclusion index is constructed to capture inclusion across three key dimensions — availability, access, and usage — using the distance function approach. Three classes of determinants are modeled: socio-demographic, infrastructural, and macroeconomic variables. Evidence indicates structural instability in the financial inclusion process for the BRIC economies, with several determinants exerting nonlinear impacts over time. The findings challenge the conventional assumption of time-invariant relationships between financial inclusion and its dominant determinants. The results reveal considerable temporal volatility in the effects of macroeconomic factors, including growth and inflation, on financial inclusion across emerging markets. Policymakers should adjust strategies, moving beyond assumptions of linear processes and managing dynamic, nonlinear factors more effectively to achieve universal financial inclusion.