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Financial inclusion, technology and their impacts on monetary and fiscal policy: theory and evidence

Robert Oleschak ()

No 2021-04, Working Papers from Swiss National Bank

Abstract: In economies with a low level of financial inclusion (FI), most activities are settled in cash and are thus more difficult to trace, record, and tax. I show theoretically that economies with inefficient financial technologies exhibit low levels of FI and of tax revenue and that using an inflation tax as an additional source of income improves welfare. Improvements in technology lead to a higher level of FI, increased tax revenue and lower (optimal) inflation. I test this prediction using panel data from a broad set of countries. The data show a strong and robust negative link between FI and inflation and a positive link between FI and tax revenue for developing countries.

Keywords: Financial inclusion; financial technology; monetary policy; fiscal policy (search for similar items in EconPapers)
JEL-codes: C12 C22 E31 E41 G21 H21 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2021
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-fle, nep-mac and nep-mon
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