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The Relationship between Financial Inclusion and Monetary Policy Transmission: The Case of Egypt

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  • Marwa Elsherif

    (Helwan University and Arab Academy for Science, Technology and Maritime Transport)

Abstract

Financial Inclusion is critical for the competitiveness, employment creation, and for raising incomes and reducing poverty. There is limited literature investigating the specific relationship between financial inclusion and monetary policy transmission. Central bank of Egypt (CBE) has launched three initiatives to support development and achievement of financial inclusion. They include an initiative to support financing small- and medium-sized enterprises (SMEs), another to support the tourism sector, in addition to a real estate financing initiative for medium- and low-income individuals. To explore the relationship between financial inclusion and monetary policy transmission in Egypt for the period of 2000 to 2017, it is proposed to use the principal component analysis (PCA) method to assign the weight of factors in financial inclusion index (by comprising selected indicators of financial development in a single index). And VECM approach to examine financial inclusion and monetary policy transmission, Granger Causality tests, and basic trend analyses, to explore empirically the relationship between financial inclusion indicators and monetary policy. The paper is arranged in sections. After the introduction, section II presents literature survey on links between financial inclusion and the goals of monetary policy, and presents stylized facts about financial inclusion in Egypt. Section III discusses the methodology of analysis. In section IV, results of econometric estimations are presented. Section V summarizes the paper with policy implications.

Suggested Citation

  • Marwa Elsherif, 2019. "The Relationship between Financial Inclusion and Monetary Policy Transmission: The Case of Egypt," Proceedings of International Academic Conferences 9010737, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:9010737
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    References listed on IDEAS

    as
    1. Alfred Hannig & Stefan Jansen, 2010. "Financial Inclusion and Financial Stability : Current Policy Issues," Finance Working Papers 23124, East Asian Bureau of Economic Research.
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    11. Giorgio Motta & Patrizio Tirelli, 2010. "Rule-of-thumb Consumers, Consumption Habits and the Taylor Principle," Working Papers 194, University of Milano-Bicocca, Department of Economics, revised Jul 2010.
    12. Aaron Mehrotra & James Yetman, 2014. "Financial inclusion and optimal monetary policy," BIS Working Papers 476, Bank for International Settlements.
    13. Abiola A. Babajide & Folasade B. Adegboye & Alexander E. Omankhanlen, 2015. "Financial Inclusion and Economic Growth in Nigeria," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 629-637.
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    Cited by:

    1. Sabyasachi Tripathi & Meenakshi Rajeev, 2023. "Gender-Inclusive Development through Fintech: Studying Gender-Based Digital Financial Inclusion in a Cross-Country Setting," Sustainability, MDPI, vol. 15(13), pages 1-34, June.
    2. Seifelyazal Mostafa & Salah Eldin Ashraf & ElSherif Marwa, 2023. "The Impact of Financial Inclusion on Economic Development," International Journal of Economics and Financial Issues, Econjournals, vol. 13(2), pages 93-101, March.
    3. Mohamed Samy ElDeeb & Yasser Tawfik Halim & Esmat Mostafa Kamel, 2021. "The pillars determining financial inclusion among SMEs in Egypt: service awareness, access and usage metrics and macroeconomic policies," Future Business Journal, Springer, vol. 7(1), pages 1-19, December.
    4. El-Bourainy Mehry & Salah Ashraf & ElSherif Marwa, 2021. "The Impact of Financial Inclusion on Unemployment Rate in Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 79-93.
    5. Tram, Thi Xuan Huong & Lai, Tien Dinh & Nguyen, Thi Truc Huong, 2023. "Constructing a composite financial inclusion index for developing economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 257-265.

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    More about this item

    Keywords

    Financial Inclusion; Monetary Policy; VECM; Granger Causality Test;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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