Does economic policy uncertainty reduce financial inclusion?

Peterson Ozili

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines whether economic policy uncertainty (EPU) reduces the level of financial inclusion. I predict that high EPU should have a negative effect on the level of financial inclusion. I argue that high EPU will discourage financial institutions from providing basic financial services to low end customers and unbanked adults, and this will lead to a decrease in the level of financial inclusion. Using a sample of 22 countries, I find that EPU does not have a significant impact on financial inclusion. None of the nine indicators of financial inclusion have a significant direct relationship with EPU. Also, I find some evidence that the combined effect of high EPU and high nonperforming loans reduces financial inclusion, particularly through bank branch contraction and a reduction in the use of electronic payments. Meanwhile, the use of formal accounts and credit cards increases in times of high credit supply and high EPU.

Keywords: Financial inclusion; policy uncertainty; economic policy uncertainty; business cycle; non-performing loan; cost efficiency; cost to income ratio; access to finance; formal account; credit cards; debit cards; mobile payments; electronic payment; borrowings; savings bank branch; unbanked adults. (search for similar items in EconPapers)
JEL-codes: E50 E52 E59 G21 I31 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-cwa, nep-fle, nep-mac and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:111052

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