TOO MUCH OF A GOOD THING? UNCOVERING THE OPTIMAL LEVEL OF FINANCIAL INCLUSION FOR GROWTH
DOI:
https://doi.org/10.18623/rvd.v22.n6.3956Palabras clave:
Financial Inclusion, Economic Growth, Nonlinear Effects, System GMM, Threshold EstimationResumen
This study investigates the nonlinear effect of financial inclusion on economic growth using a balanced panel of 54 countries from 2004 to 2023. A multidimensional financial inclusion index is constructed using principal component analysis to capture both supply side and demand side dimensions of access. Employing the dynamic system GMM estimator, the analysis addresses potential endogeneity, persistence and unobserved heterogeneity. The results reveal an inverted U shaped relationship between financial inclusion and economic growth. Financial inclusion has a positive and significant effect at lower levels, but its marginal impact declines and eventually becomes negative once a threshold level is exceeded. The estimated turning point is 27.8, indicating that financial inclusion promotes growth only up to this level. Vietnam’s financial inclusion level of 21.5 places it below the threshold, implying that further expansion in financial access can still yield growth enhancing benefits if accompanied by appropriate regulation and consumer protection. The study highlights the need for policymakers to balance the expansion of financial services with effective supervision to avoid excessive lending and financial instability. Overall, the findings underscore that financial inclusion is beneficial, but only when managed in a sustainable and well regulated manner.
Citas
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