The effects of financial inclusion and openness on economic growth: evidence from Asian countries

Sujata Saha

Journal of Economic Studies, 2025, vol. 53, issue 6, 1209-1222

Abstract: PurposeThis paper examines the effects of financial inclusion and openness on economic growth using panel data from 27 Asian countries.Design/methodology/approachIt uses the panel autoregressive distributed lag (ARDL) methodology, specifically the pooled mean group (PMG) estimation method introduced by Pesaran (1997) and Pesaran et al. (1999). The cointegration and error-correction modeling are conducted using annual data from 2004 to 2019 for 27 Asian countries.FindingsThe results show a positive impact on economic growth from financial inclusion, considering the number of Automatic Teller Machines (ATMs) per 100,000 adults and the number of commercial bank branches per 100,000 adults, both in the long run. However, the number of commercial bank branches affects economic growth positively only in the short run. In addition to the other variables, the KOF Globalization Index, which measures the economic, social and political dimensions of globalization, has a positive impact on economic growth in the long run.Originality/valueThis paper adds to the literature by studying the impact of financial inclusion and openness on economic growth in Asia in two ways. First, it studies the effects of essential indicators of financial inclusion (availability of ATMs and the number of bank branches in a region) on economic growth. To make the analysis stronger, variables on openness, such as trade openness and the KOF Globalization Index, are considered to capture their implication on economic growth. Second, this paper specifically employs the panel autoregressive distributed lag (ARDL) methodology to assess the effects of financial inclusion and other relevant variables in countries from Asia. One of the major advantages of panel ARDL methodology is that it generates valid long run results while at the same time accounting for any short run deviations.

Keywords: Panel ARDL; Financial inclusion; Openness; Growth; Asia (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-05-2025-0304

DOI: 10.1108/JES-05-2025-0304

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