Evaluating the influence of digital financial inclusion on financial crises and economic cycles: a Bayesian logistic regression insight

Dinh Le Quoc, Huy Nguyen Quoc and Hai Nguyen Van

Journal of Financial Regulation and Compliance, 2025, vol. 33, issue 2, 280-301

Abstract: Purpose - This paper aims to examine the impact of Digital Financial Inclusion (DFI) on three key economic aspects: banking crises, economic expansion and economic downturns across 93 countries from 2004 to 2017. Design/methodology/approach - Bayesian Logit regression models provide important insights into how DFI influences these economic factors. Findings - The findings show that DFI has a modest positive effect on banking crises (coefficients: 0.002–0.027), but rapid growth could increase crisis risks if not regulated. DFI positively impacts economic expansion (coefficients: 0.003–0.012), supporting growth at reasonable levels. For economic downturns, DFI has a negative effect, potentially reducing recession risks, though the impact is small. Regionally, DFI helps mitigate banking crises and downturns in Africa, Latin America and Asia, but in Europe, it slightly increases risks, suggesting potential instability if not properly managed. Originality/value - The study provides original insights into the nuanced effects of DFI on banking crises, economic expansion and economic downturns across different regions, offering valuable policy recommendations based on these findings.

Keywords: Digital financial inclusion; Banking crisis; Economic expansion; Economic downturn; E32; G01; O16; O40 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-10-2024-0206

DOI: 10.1108/JFRC-10-2024-0206

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