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Abstract
This paper examines the effect of the globalization threshold on financial inclusion in 40 selected countries during 2000-2018. A principal component analysis (PCA) and a static panel threshold (SPT) are utilized. There are three dimensions and one aggregation of financial inclusion indicators assessed by PCA, while the globalization threshold is estimated under static panel threshold regression. Findings/Originality: The findings exhibit six countries with strong financial inclusion and eight countries with weak financial inclusion during study periods. Furthermore, the threshold effect of globalization has a significant impact on the financial inclusion index. The robustness checking employs panel cointegration test exhibits that inequality and some institutions indicators have a significant impact on financial inclusion both in the short-run and long-run. The policy implication suggests that governments should increase the financial inclusion index level during the globalization period, decrease inequality, and improve institutions' quality.
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References
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- Arora, R. U. (2010). Measuring financial access. Griffith Business School Discussion Papers Economics, 7.
- Baiardi, D., & Morana, C. (2018). Financial development and income distribution inequality in the euro area. Economic Modelling, 70, 40–55. https://doi.org/10.1016/j.econmod.2017.10.008
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- Dahiya, S., & Kumar, M. (2020). Linkage between financial inclusion and economic growth: An empirical study of the emerging Indian economy. Vision: The Journal of Business Perspective, 24(2), 184–193. https://doi.org/10.1177/0972262920923891
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- Dymski, G. A. (2005). Financial globalization, social exclusion and financial crisis. International Review of Applied Economics, 19(4), 439–457. https://doi.org/10.1080/02692170500213319
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- Yorulmaz, R. (2018). An analysis of constructing global financial inclusion indices. Borsa Istanbul Review, 18(3), 248–258. https://doi.org/10.1016/j.bir.2018.05.001
References
Aginta, H., Soraya, D., & Santoso, W. (2018). Financial development and income inequality in Indonesia: A sub-national level analysis. Economics and Finance in Indonesia, 64(2), 111–130.
Arora, R. U. (2010). Measuring financial access. Griffith Business School Discussion Papers Economics, 7.
Baiardi, D., & Morana, C. (2018). Financial development and income distribution inequality in the euro area. Economic Modelling, 70, 40–55. https://doi.org/10.1016/j.econmod.2017.10.008
Barajas, M. A., Beck, T., Dabla-Norris, M. E., & Yousefi, M. R. (2013). Too cold, too hot, or just right? Assessing financial sector development across the globe. International Monetary Fund.
Dahiya, S., & Kumar, M. (2020). Linkage between financial inclusion and economic growth: An empirical study of the emerging Indian economy. Vision: The Journal of Business Perspective, 24(2), 184–193. https://doi.org/10.1177/0972262920923891
Delechat, M. C. C., Newiak, M. M., Xu, R., Yang, M. F., & Aslan, G. (2018). What is driving women’s financial inclusion across countries? International Monetary Fund Working Paper No. 18/38.
Dymski, G. A. (2005). Financial globalization, social exclusion and financial crisis. International Review of Applied Economics, 19(4), 439–457. https://doi.org/10.1080/02692170500213319
Gupte, R., Venkataramani, B., & Gupta, D. (2012). Computation of financial inclusion index for India. Procedia - Social and Behavioral Sciences, 37, 133–149. https://doi.org/10.1016/j.sbspro.2012.03.281
Gygli, S., Haelg, F., Potrafke, N., & Sturm, J.-E. (2019). The KOF globalisation index–revisited. The Review of International Organizations, 14(3), 543–574.
Hansen, B. E. (1999). Threshold effects in non-dynamic panels: Estimation, testing, and inference. Journal of Econometrics, 93(2), 345–368. https://doi.org/10.1016/S0304-4076(99)00025-1
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The worldwide governance indicators: A summary of methodology. Data and Analytical Issues, World Bank Policy Research Working Paper, 5430.
Kim, J.-H. (2015). A study on the effect of financial inclusion on the relationship between income inequality and economic growth. Emerging Markets Finance and Trade, 52(2), 498–512. https://doi.org/10.1080/1540496x.2016.1110467
Lenka, S. K., & Barik, R. (2018). A discourse analysis of financial inclusion: Post-liberalization mapping in rural and urban India. Journal of Financial Economic Policy, 10(3), 406–425. https://doi.org/10.1108/jfep-11-2015-0065
Melecky, M., & Podpiera, A. M. (2020). Financial sector strategies and financial sector outcomes: Do the strategies perform? Economic Systems. https://doi.org/10.1016/j.ecosys.2020.100757
Nasreen, S., Mahalik, M. K., Shahbaz, M., & Abbas, Q. (2020). How do financial globalization, institutions and economic growth impact financial sector development in European countries? Research in International Business and Finance. https://doi.org/10.1016/j.ribaf.2020.101247
Park, C.-Y., & Mercado Jr., R. V. (2015). Financial inclusion, poverty, and income inequality in developing Asia. Asian Development Bank.
Pedroni, P. (2000). Fully modified OLS for heterogeneous cointegrated panels. In Advances in Econometrics (Vol. 15, pp. 93–130). Emerald (MCB UP ). https://doi.org/10.1016/S0731-9053(00)15004-2
Pedroni, P. (2001). Purchasing Power Parity Tests in Cointegrated Panels. Review of Economics and Statistics, 83(4), 727–731. https://doi.org/10.1162/003465301753237803
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled Mean Group Estimation of Dynamic Heterogeneous Panels. Journal of the American Statistical Association, 94(446), 621–634. https://doi.org/10.1080/01621459.1999.10474156
Pesaran, M. H., & Smith, R. (1995). Estimating long-run relationships from dynamic heterogeneous panels. Journal of Econometrics, 68(1), 79–113. https://doi.org/10.1016/0304-4076(94)01644-F
Sanjaya, I. M., & Nursechafia, N. (2016). Financial inclusion and inclusive growth: A cross-province analysis in Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 18(3), 281–306.
Sarma, M. (2008). Index of financial inclusion (No. 22259; Finance Working Papers). East Asian Bureau of Economic Research.
Sarma, M. (2012). Index of financial inclusion—A measure of financial sector inclusiveness. Berlin Working Papers on Money, Finance, Trade and Development No. 07/2012.
Sethi, D., & Acharya, D. (2018). Financial inclusion and economic growth linkage: Some cross country evidence. Journal of Financial Economic Policy, 10(3), 369–385. https://doi.org/10.1108/jfep-11-2016-0073
Sethy, S. K. (2016). Developing a financial inclusion index and inclusive growth in India. Theoretical and Applied Economics, 23(2), 187–206.
The World Bank. (2017). Global Findex database report 2017. World Bank Publications.
Xu, X. (2019). Trust and financial inclusion: A cross-country study. Finance Research Letters. https://doi.org/10.1016/j.frl.2019.101310
Yorulmaz, R. (2018). An analysis of constructing global financial inclusion indices. Borsa Istanbul Review, 18(3), 248–258. https://doi.org/10.1016/j.bir.2018.05.001