scholarly journals Financial Inclusion and Economic Growth: Empirical Evidence from Selected Developing Economies

2020 ◽  
Vol 6 (1) ◽  
pp. 179-203
Author(s):  
Noor ul Ain ◽  
Samina Sabir ◽  
Nabila Asghar
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Low Income ◽  
Developing Economies ◽  
Generalized Method Of Moments ◽  
Political Stability ◽  
Income Group ◽  
Financial Inclusion ◽  
Institutional Variables ◽  
Positive Effect

Financial inclusion is a tool used to enhance economic growth, alleviate poverty, create employment and reduce income inequality in developing countries through providing affordable financial goods and services to low income group through financial institutions. This study analyzes the relationship among financial inclusion, entrepreneurship, institutions and economic growth for 33 developing countries over time 2004-2016 using Generalized Method of Moments (GMM). The variables of financial inclusion, entrepreneurship and institutions are incorporated in Solow growth model through total factor productivity. Empirical results show that financial inclusion has positive effect on economic growth while entrepreneurship has negative but significant effect on economic growth. Whereas some institutional variables like rule of law and political stability have negative and other institutional variables like control of corruption and government effectiveness have positive effect on economic growth.

IMPACTS OF FINANCIAL INCLUSION ON POVERTY AND INCOME INEQUALITY IN DEVELOPING ASIA

2021 ◽  
pp. 1-17
Author(s):  
WARATTAYA CHINNAKUM
Keyword(s):  
Developing Countries ◽  
Income Inequality ◽  
Low Income ◽  
Financial Services ◽  
Trade Openness ◽  
Generalized Method Of Moments ◽  
Principal Component ◽  
Financial Inclusion ◽  
Poor Households ◽  
Low Income Groups

This study investigates the impacts of financial inclusion on poverty and income inequality in 27 developing countries in Asia during 2004–2019 based on a composite financial inclusion index (FII) constructed using principal component analysis (PCA). The generalized method of moments (GMM) was employed for the estimation. The results show that financial inclusion can influence the reduction in both poverty and income inequality. The empirical findings also reveal the contribution of such control variables as economic growth in decreasing income disparity and trade openness in helping improve the standard of living of poor households despite its tendency to co-vary with income inequality. The present empirical evidence supporting the role of financial inclusion in reducing poverty and income inequality in developing countries has led to a policy implication that financial sector development should focus on the availability, usage, and depth of credit to cover all poor households or low-income groups to help improve their access to financial services, enable them to increase their income, and reduce the income gap between poor and rich households.

A tale of the financial inclusion-growth nexus and the degree of financial inclusion: a dynamic panel approach on selected developing countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Biplob Kumar Nandi ◽  
Gazi Quamrul Hasan ◽  
Md. Humayun Kabir
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Developing Economies ◽  
Positive Impact ◽  
Financial Inclusion ◽  
Per Capita Gdp ◽  
Content Type ◽  
Medium Level ◽  
Per Capita ◽  
High Level

Purpose This study aims to examine the impact of financial inclusion on per capita gross domestic product (GDP) at varying degrees of financial inclusion for a sample of 76 developing countries between 2011 and 2017. To evaluate the heterogeneous impact, this paper constructs the multi-dimension index of financial inclusion to classify sample countries into two sub-samples in terms of the value of FIID, taking account of three dimensions of financial inclusion: access, usage and availability. Design/methodology/approach This study attempts to identify the presence of reverse causality and long-run relationship between financial inclusion and economic growth by using the Granger causality test (Wald test) and three alternative panel cointegration tests (Kao Test, Pedroni Test, Westerlund Test) respectively. Because of the existence of the bi-directional causality between financial inclusion and per capita GDP, this study uses a fixed effect instrumental variable model with lagged dependent variable to get unbiased estimators from the panel regressions for sample countries. Findings This paper finds a strong positive impact of financial inclusion on per capita GDP growth in sample developing countries, controlling for labor market structure, financial institutions’ efficacy, infrastructural and governance issues. This study suggests that economic growth will be high in developing economies with a higher level of financial inclusion; however, the positive impact for two sub-samples countries (low and medium level of inclusion and high level of inclusion) are heterogeneous. The estimated result explains that a 1% increase in the financial inclusion index leads to a 0.0153% point increase in the per capita GDP for the countries with a low and medium level of financial inclusion, while this positive impact is significantly higher, 0.0794% point for countries with the high level of financial inclusion. This study also suggests that the higher concentration in the financial market by few agents and the lower level of governance may have an adverse impact on economic growth for the economies with a low and medium level of financial inclusion. Originality/value This study is an original study that contributes to the research gap by explaining the heterogeneous impact of financial inclusion on economic growth at varying degrees of inclusion in the two sub-sample countries. Moreover, this study posits greater appeal as it explores the issue using the sample of only developing economies.

Financial liberalization and economic growth

2015 ◽  
Vol 42 (2) ◽  
pp. 207-223 ◽  
Author(s):  
Thiago Henrique Carneiro Rios Lopes ◽  
Cleiton Silva de Jesus
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Fixed Effects ◽  
Financial Integration ◽  
Generalized Method Of Moments ◽  
Capital Account ◽  
Capital Account Liberalization ◽  
Content Type ◽  
Positive Effect ◽  
Interactive Variable

Purpose – The purpose of this paper is to ascertain whether countries benefit from capital account liberalization in more democratic contexts. Design/methodology/approach – The authors used the follow methodologies in this paper: Pooled OLS, panel data with fixed effects and generalized method of moments. The empirical exercises were conducted for both a large sample and a smaller group of developing countries. Given the characteristics of the variables used in the standard model, the main conclusions were obtained from an estimation that took into account the presence of fixed effects and endogeneity. Findings – Considering a sample of 77 countries, the authors were able to ascertain that capital account openness has a positive effect on economic growth only in highly democratic countries. When the same estimates are carried out with a more restricted sample, composed of 50 developing countries, the results are more pessimistic. In this case, capital account openness has a negative and significant effect, although being more democratic is not sufficient in itself to reap the benefits of financial integration. Research limitations/implications – The results obtained in this paper are limited to the number of observations and the period analysed. Furthermore, the conclusions need to be confirmed by a test of robustness, which should be conducted in future works; such works could make use of other democracy indicators and other instruments. Originality/value – The innovation of the work, in comparison to those the authors consulted, resides in its testing, through an interactive variable, whether the effect of capital openness on economic growth depends on level of democracy.

scholarly journals Does Greenfield Foreign Direct Investment Inflow contribute in Socioeconomic Development? Empirical Evidence from Developing Countries

2021 ◽  
Vol 9 (3) ◽  
Author(s):  
Shahid Akbar ◽  
Ali Raza ◽  
Zahid Raza
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Economic Development ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
Dependent Variables ◽  
Socio Economic Development ◽  
The Impact ◽  
Positive Effect

This study aims to assess the impact of Greenfield-Foreign Direct Investment (FDI) inflows on the socio-economic development of ten developing countries. Developing economies rely on investment from developed countries, especially Greenfield investment. Greenfield investment is the new capital inflow to the host country's economy that helps to improve economic activities, boosts economic growth, and improves socio-economic welfare. This study has used Greenfield investment as the target-independent variable and other controlled variables remittances, aid, inflation, population, and trade openness. At the same time, socio-economic development, health, economic growth, and education are dependent variables. For this purpose, Pooled Mean Group (PMG) technique/Panel Autoregressive-Distributed Lag (ARDL) has applied for estimation purposes from 1990 to 2017. The empirical findings have shown that Greenfield-FDI has a long-term statistically significant and positive effect on economic growth, health, education, and socio-economic development. In comparison, remittances and official development assistance have positive and negative impacts on the study's dependent variables. The population also has a positive effect, whereas inflation and trade have mixed results. Outcomes of this study advise that policymakers should adopt attractive investment policies to enhance more foreign investment and utilize it efficiently, thereby promoting sustainable development. The government should announce firms to invest in human capital, which will impact productivity.   

scholarly journals Effect of Poverty Volatility on Tax Revenue Instability in Developing Countries

2020 ◽  
Author(s):  
SENA KIMM GNANGNON
Keyword(s):  
Developing Countries ◽  
Low Income ◽  
Generalized Method Of Moments ◽  
Low Income Countries ◽  
Tax Revenue ◽  
High Poverty ◽  
Full Sample ◽  
The Stability ◽  
The Empirical Analysis ◽  
Positive Effect

Abstract This paper complements the relatively few existing studies on the macroeconomic effects of poverty in developing countries, by investigating the effect of poverty volatility on tax revenue instability. The empirical analysis has been conducted using an unbalanced panel dataset of 112 developing countries covering the period 1980-2017, and primarily the two-step system Generalized Method of Moments technique. Findings have revealed that, on average, over the full sample, poverty volatility is associated with lower tax revenue instability. However, this reflects differentiated effect across countries, as low-income countries tend to experience a positive tax revenue instability effect of poverty volatility, while poverty volatility results in lower tax revenue instability in relatively advanced countries (among developing countries). Additionally, these outcomes hide the fact that poverty volatility exerts a higher positive effect on tax revenue instability in the context of increasing poverty rates. From a policy perspective, this analysis shows that it is essential for policymakers to dampen the volatility of poverty rates (notably in countries with high poverty rates) if they were to ensure the stability of tax revenue or reduce its instability, given the adverse effect of tax revenue instability on economic growth.

scholarly journals Degree of financialization and energy efficiency in Sub-Saharan Africa: do institutions matter?

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Philip Kofi Adom ◽  
Franklin Amuakwa-Mensah ◽  
Salome Amuakwa-Mensah
Keyword(s):  
Economic Growth ◽  
Energy Efficiency ◽  
Banking Sector ◽  
Developing Economies ◽  
Generalized Method Of Moments ◽  
Energy Utilization ◽  
Sub Saharan Africa ◽  
Political Regimes ◽  
Growth Strategies ◽  
Bank Profitability

Abstract The United Nations Sustainable Development Goal 7 emphasizes the need for economies around the world to double their efforts in energy efficiency improvements. This is because improvements in energy efficiency can trigger economic growth and considered as one of the ‘green’ growth strategies due to its carbon free content. To this end, some empirical studies have investigated the nexus between economic growth and energy efficiency, but the effects of the latter on financial indicators have not been sufficiently studied in the literature, at least in developing economies like Africa. This study examines the effect of energy efficiency improvements on commercial bank profitability under different political regimes (i.e., autocratic and democratic political regimes); something previous literature had neglected. The study uses panel data, consisting of 43 African countries and the simultaneous System Generalized Method of Moments. We found that energy efficiency improvement is more likely to induce higher bank profitability in political institutions with the characteristics of centralization of power compared with those with decentralization of power. Furthermore, for the banking sector, the findings suggest that energy utilization behavior of clients should be included in the loan or credit valuation process. For the government, the agenda of energy efficiency should be aggressively pursued while taking cognizance of creating a political environment that weans itself from a ‘grandfathering’ behavior.

scholarly journals Economic Growth and Income Inequality in Developing Countries

2015 ◽  
Vol 9 (6) ◽  
pp. 79-82 ◽  
Author(s):  
Morteza Nemati ◽  
Ghasem Raisi
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Income Inequality ◽  
Income Distribution ◽  
Economic System ◽  
Development Strategy ◽  
Low Income ◽  
Poverty Eradication ◽  
The Relationship ◽  
Selection Of

Nowadays, improvement in income distribution and poverty eradication and hence low inequality are served as the main objectives of economic and social development strategy even prior than primary tasks of governments. to manifest importance of income distribution, some economists adopt income inequality and income distribution in society as criteria for economic system of the community, although these criteria and measures are theoretical for the economic system and this varies from the perspective of different people, however, it denotes on  importance of income distribution among individuals. The main objective of this study was to evaluate the effect of economic growth on income inequality in the selection of low-income developing countries.To this end, using panel data and data for 28 developing countries over the period 1990-2010 the relationship between GDP and the Gini coefficient was examined. The results indicate that as per hypothesis Kuznets in the early stages of growth, income inequality increases and then it declines in later stage.

scholarly journals Renewable Energy Development as a Driver of Economic Growth: Evidence from Multivariate Panel Data Analysis

2019 ◽  
Vol 11 (8) ◽  
pp. 2418 ◽  
Author(s):  
Nadia Singh ◽  
Richard Nyuur ◽  
Ben Richmond
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Renewable Energy ◽  
Energy Production ◽  
Developing Economies ◽  
Panel Data Analysis ◽  
Least Square ◽  
Renewable Energy Production ◽  
The Future ◽  
The Impact

Renewable energy is being increasingly touted as the “fuel of the future,” which will help to reconcile the prerogatives of high economic growth and an economically friendly development trajectory. This paper seeks to examine relationships between renewable energy production and economic growth and the differential impact on both developed and developing economies. We employed the Fully Modified Ordinary Least Square (FMOLS) regression model to a sample of 20 developed and developing countries for the period 1995–2016. Our key empirical findings reveal that renewable energy production is associated with a positive and statistically significant impact on economic growth in both developed and developing countries for the period 1995–2016. Our results also show that the impact of renewable energy production on economic growth is higher in developing economies, as compared to developed economies. In developed countries, an increase in renewable energy production leads to a 0.07 per cent rise in output, compared to only 0.05 per cent rise in output for developing countries. These findings have important implications for policymakers and reveal that renewable energy production can offer an environmentally sustainable means of economic growth in the future.

FINANCIAL STABILITY AND FINANCIAL INCLUSION: THE CASE OF SME LENDING

2018 ◽  
Vol 63 (01) ◽  
pp. 111-124 ◽  
Author(s):  
PETER J. MORGAN ◽  
VICTOR PONTINES
Keyword(s):  
Low Income ◽  
Financial Services ◽  
Financial Stability ◽  
Developing Economies ◽  
Empirical Studies ◽  
Bank Lending ◽  
Financial Inclusion ◽  
Nonperforming Loans ◽  
Z Scores ◽  
Negative Impacts

Developing economies are seeking to promote financial inclusion, i.e., greater access to financial services for low-income households and firms. This raises the question of whether greater financial inclusion tends to increase or decrease financial stability. A number of studies have suggested both positive and negative impacts on financial stability, but very few empirical studies have been made. This study focuses on the implications of greater financial inclusion for small and medium-sized enterprises (SMEs) for financial stability. It estimates the effects of measures of the share of bank lending to SMEs on two measures of financial stability — bank nonperforming loans and bank Z scores. We find some evidence that an increased share of lending to SMEs aids financial stability by reducing non-performing loans (NPLs) and the probability of default by financial institutions.

scholarly journals Foreign aid on economic growth in Africa: A comparison of low and middle-income countries

2015 ◽  
Vol 18 (4) ◽  
pp. 449-462 ◽  
Author(s):  
Aye Mengistu Alemu ◽  
Jin-Sang Lee
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Low Income ◽  
Empirical Studies ◽  
Critical Role ◽  
Generalized Method Of Moments ◽  
African Countries ◽  
Middle Income ◽  
Middle Income Countries ◽  
Theoretical Hypothesis

Previous empirical studies on the effects of foreign aid on economic growth have generated mixed results that make it difficult to draw policy recommendations. The main reason for such mixed results is the choice of a single aggregate list of countries, regardless of the disparities in levels of development. This study therefore fills the development gap by disaggregating the African data into a panel of 20 middle- income and 19 low- income African countries over a period of 15 years between 1995 and 2010, and employing a dynamic generalized method of moments (GMM) model to address the dynamic nature of economic growth as well as the problems of endogeneity. The results of this study support the theoretical hypothesis that a positive relationship between aid and GDP growth exists, but only for low-income African countries, not middle-income ones. On the other hand, the study reveals that middle- income African countries tend to experience a greater impact on their economic growth from foreign direct investment (FDI) and natural resources revenues, mainly oil exports. This implies that the frequent criticism that foreign aid has not contributed to economic growth is flawed, at least in the case of low-income African countries. In fact, foreign aid has played a critical role in stimulating economic growth in such countries through supplementing domestic sources of finance such as savings, thus increasing the amount of investment and capital stock in them.

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