Nonlinear relationship between financial inclusion and inclusive economic development in developed economies: evidence from panel smooth transition regression model

Sehrish Timer and Syed Raza

International Journal of Social Economics, 2022, vol. 50, issue 8, 1022-1037

Abstract: Purpose - The purpose of this study is to investigate the nonlinear association between financial inclusion and inclusive economic growth (IEG) in developed economies. A Block of G7 countries (Germany, Japan, Canada, France, Italy, the UK and the US) are considered in this study. Design/methodology/approach - For analysis, the authors have employed the “Panel Smooth Transition Regression model.” Annual data consists of the period from 1995 to 2019. Findings - This research makes a unique contribution to literature with reference to G7 countries, being a pioneering attempt to apply the panel threshold regression model to analyze the relationship between financial inclusion and IEG by applying more rigorous and advanced econometric techniques. Originality/value - The results indicate that total labor force available in a country, gross fixed capital formation and financial inclusion are positive and significant in lower regimes, but as it moves toward the higher regime, the labor force available in a country becomes less impactful. However, an increase has been observed in financial inclusion in the higher regime. The complete sample generally exhibits a positive yet significant relationship between financial inclusion and inclusive economic development.

Keywords: Financial inclusion; Inclusive economic development; G7 countries; PSTR (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijsepp:ijse-04-2022-0223

DOI: 10.1108/IJSE-04-2022-0223

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