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FINANCIAL INCLUSION AND MACROECONOMIC STABILITY IN EMERGING AND FRONTIER MARKETS

ANH THE VO

Business and Economics Research Group, Ho Chi Minh City Open University, Vietnam

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LOAN THI-HONG VAN

Business and Economics Research Group, Ho Chi Minh City Open University, Vietnam

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DUC HONG VO

Business and Economics Research Group, Ho Chi Minh City Open University, Vietnam

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, and

MICHAEL MCALEER

Department of Finance, Asia University, Taiwan

Discipline of Business Analytics, University of Sydney Business School, Australia

Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands

Department of Economic Analysis and ICAE, Complutense University of Madrid, Spain

Institute of Advanced Sciences, Yokohama National University, Japan

E-mail Address: michael.mcaleer@gmail.com

Corresponding author.

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https://doi.org/10.1142/S2010495219500088Cited by:31 (Source: Crossref)

Abstract

Financial inclusion, being considered as a key enabler to reducing poverty and boosting prosperity in emerging and frontier markets such as Vietnam, is the process in which individuals and small businesses are provided with an access to useful and affordable financial products and services. The extant literature on the empirical evidence regarding the contribution of financial inclusion to macroeconomic stability is mixed. This paper investigates the linkages between financial inclusion and macroeconomic stability, which has not yet been thoroughly examined in the literature, for 22 emerging and frontier economies from 2008 to 2015, with particular focus on a potential optimal level. Using the panel threshold estimation technique, the empirical findings show that financial inclusion, as approximated by the growth rate in the number of bank branches over 100,000 account holders, is found to enhance financial stability under a certain threshold. Financial inclusion is also found to be of benefit to maintaining stable inflation and output growth. Policy implications are also discussed on the basis of the important empirical findings.

Keywords:

JEL: C62, F65, O16, P45

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