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Does Financial Inclusiveness Affect Economic Growth? New Evidence Using a Dynamic Panel Threshold Regression

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  • Abdul Karim, Zulkefly
  • Nizam, Rosmah
  • Law, Siong Hook
  • Hassan, M. Kabir

Abstract

This study examines the impact of financial inclusiveness on economic growth using a sample of 60 countries from 2010 to 2017. A new Index of Financial Inclusion (IFI) has been constructed for each country to determine their level of financial inclusiveness across time. The main findings using a dynamic panel threshold estimation technique revealed a threshold effect in the financial inclusiveness-growth nexus. We find that the level of financial inclusiveness is beneficial and positively affects economic growth at lower or upper threshold levels in a different regime. Furthermore, the threshold impact of financial inclusion is positive and has a more significant growth-enhancing effect among less developed and emerging market countries relative to developed ones. Thus, policymakers in less developed and emerging market countries need to prioritize their efforts to raise the level of financial inclusiveness in place of its greater growth-enhancing effect in these countries.

Suggested Citation

  • Abdul Karim, Zulkefly & Nizam, Rosmah & Law, Siong Hook & Hassan, M. Kabir, 2022. "Does Financial Inclusiveness Affect Economic Growth? New Evidence Using a Dynamic Panel Threshold Regression," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321003676
    DOI: 10.1016/j.frl.2021.102364
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    References listed on IDEAS

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    Cited by:

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    2. Bosah, Philip Chukwunonso & Li, Shixiang & Ampofo, Gideon Kwaku Minua, 2024. "Natural resource rents and financial inclusion nexus: Evidence from Africa," Resources Policy, Elsevier, vol. 94(C).
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    4. Lee, Chien-Chiang & Lou, Runchi & Wang, Fuhao, 2023. "Digital financial inclusion and poverty alleviation: Evidence from the sustainable development of China," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 418-434.
    5. Shahzad Hussain & Ajid ur Rehman & Sabeeh Ullah & Abdul Waheed & Shoaib Hassan, 2024. "Financial Inclusion and Economic Growth: Comparative Panel Evidence from Developed and Developing Asian Countries," SAGE Open, , vol. 14(1), pages 21582440241, February.
    6. Jose Aurazo & Farid Gasmi, 2024. "Financial inclusion transitions in Peru: does labor informality play a role?," BIS Working Papers 1200, Bank for International Settlements.
    7. Siddiki, Jalal & Bala-Keffi, Ladi R., 2024. "Revisiting the relation between financial inclusion and economic growth: a global analysis using panel threshold regression," Economic Modelling, Elsevier, vol. 135(C).
    8. Basnayake, Dananjani & Naranpanawa, Athula & Selvanathan, Saroja & Bandara, Jayatilleke S., 2024. "Financial inclusion through digitalization and economic growth in Asia-Pacific countries," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    9. Wang, Xiong & Yang, Wanping & Ren, Xiaohang & Lu, Zudi, 2023. "Can financial inclusion affect energy poverty in China? Evidence from a spatial econometric analysis," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 255-269.
    10. Adella Siti Nursaliyawati & Siskarossa Ika Oktora, 2022. "Simultaneous Relationship between Financial Inclusion, Economic Growth, and Income Inequality in Sulawesi Island, 2011–2019," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 68, pages 132-148, Desember.
    11. Hodžić, Sabina & Šikić, Tanja Fatur & Dogan, Eyup, 2023. "Green environment in the EU countries: The role of financial inclusion, natural resources and energy intensity," Resources Policy, Elsevier, vol. 82(C).
    12. Ma, Jing & He, Zhangyin, 2024. "Business environment and quality of economic development–Evidence from countries along the Belt and Road," Finance Research Letters, Elsevier, vol. 69(PA).

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    More about this item

    Keywords

    Financial inclusion; Economic Growth; Threshold effects; Dynamic panel threshold;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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