The Causality between Financial Inclusion and Inclusive Growth: Evidence from A Newly Constructed Index in Egypt

Hanan Abouelfarag and Noha Elboghdadly
Additional contact information
Hanan Abouelfarag: Damanhour University
Noha Elboghdadly: Faculty of Economic Studies and Political Science

No 1736, Working Papers from Economic Research Forum

Abstract: Financial inclusion is one of the key enablers of driving economic growth, alleviating poverty, and consequently achieving inclusive growth. Although the relationship between financial inclusion and economic growth has been widely investigated, its relationship with inclusive growth remains unexplored. This paper examines the causality between financial inclusion and inclusive growth in Egypt during the period 2004-2022. The novelty of this study resides in constructing two composite indices using a Principal Components Analysis (PCA). The first composite index is for financial inclusion, while the second is a new multidimensional index for inclusive growth. The results reveal that the Inclusive Growth Index experiences an upward trend over the study period while the Financial Inclusion Index starts to increase in 2018. The results of the Toda-Yamamoto Causality Test show a bidirectional causality between financial inclusion and three of the sub-indices of inclusive growth as well as the overall inclusive growth index. The empirical evidence highlights that financial inclusion efforts will not achieve their targeted outcome unless a simultaneous inclusive growth strategy is conducted. Moreover, improving governance indicators is crucial to promoting inclusive growth.

Pages: 33
Date: 2024-09-20, Revised 2024-09-20
References: Add references at CitEc
Citations:

Published by The Economic Research Forum (ERF)

Downloads: (external link)
https://erf.org.eg/publications/the-causality-betw ... cted-index-in-egypt/ (application/pdf)
https://bit.ly/4pqitoz (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:erg:wpaper:1736

Access Statistics for this paper

More papers in Working Papers from Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Namees Nabeel ().