A dynamic panel threshold regression on financial inclusion-financial stability nexus: Evidence from developing countries

Meriem Sebai () and Omar Talbi ()
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Meriem Sebai: Faculty of Economic Sciences and Management of Tunis, Univerity of Tunis El-Manar, Tunisia
Omar Talbi: Faculty of Economic Sciences and Management of Tunis, Univerity of Tunis El-Manar, Tunisia

Economics Bulletin, 2024, vol. 44, issue 3, 813 - 831

Abstract: This paper investigates the relationship between financial inclusion and financial stability in 24 developing countries during the period 2004-2020. In light of inconclusive findings in prior research regarding this association, this study employs a dynamic panel threshold model. This approach incorporates time-varying threshold effects and lagged variables to identify distinct regimes, enabling a comprehensive analysis of nonlinear interactions between variables. The empirical findings reveal a nonlinear relationship between financial inclusion and financial stability. Financial inclusion significantly reinforces financial stability, especially in its lower regime, while the upper regime of financial inclusion exacerbates financial instability. This research makes new evidence on the financial inclusion-financial stability nexus.

Keywords: Financial inclusion; Financial stability; Dynamic panel threshold regression; Nonlinear relationship; Developing countries. (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2024-09-30
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