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Financial inclusion and macroeconomic stability in emerging and frontier markets

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Vo, Anh The and Van, Loan Thi-Hong and Vo, Duc Hong and McAleer, Michael (2019) Financial inclusion and macroeconomic stability in emerging and frontier markets. [ Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 01, 2019, ISSN: 2341-2356 ]

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Abstract

Financial inclusion, being considered as a key enabler to reducing poverty and boosting prosperity in emerging and frontier markets such as Vietnam, is the process in which individuals and small businesses are provided with an access to useful and affordable financial products and services. The extant literature on the empirical evidence regarding the contribution of financial inclusion to macroeconomic stability is mixed. This paper investigates the linkages between financial inclusion and macroeconomic stability, which has not yet been thoroughly examined in the literature, for 22 emerging and frontier economies from 2008 to 2015, with particular focus on a potential optimal level. Using the panel threshold estimation technique, the empirical findings show that financial inclusion, as approximated by the growth rate in the number of bank branches over 100,000 account holders, is found to enhance financial stability under a certain threshold. Financial inclusion is also found to be of benefit to maintaining stable inflation and output growth. Policy implications are also discussed on the basis of the important empirical findings.


Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Financial inclusion; Macroeconomic stability; Panel threshold; Emerging and frontier markets.
Subjects:Sciences > Mathematics > Mathematical analysis
Social sciences > Economics > World economy
Social sciences > Economics > Stock exchanges
JEL:C62, F65, O16, P45
Series Name:Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2019
Number:01
ID Code:54660
Deposited On:15 Mar 2019 11:21
Last Modified:15 Mar 2019 11:21

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