Assessing the Impact of Financial Inclusion on Inflation Rate in Developing Countries - Open Journal of Social Sciences

JSS > Vol.9 No.1, January 2021

Open Journal of Social Sciences

Volume 9, Issue 1 (January 2021)

ISSN Print: 2327-5952 ISSN Online: 2327-5960

Google-based Impact Factor: 0.73 Citations

Assessing the Impact of Financial Inclusion on Inflation Rate in Developing Countries ()

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Download as PDF (Size: 494KB) PP. 397-424

DOI: 10.4236/jss.2021.91030 979 Downloads 4,989 Views Citations

Author(s)

Mehry El Bourainy^1*, Ashraf Salah², Marwa El Sherif¹

Affiliation(s)

¹Finance Department, College of Management and Technology, Arab Academy for Science and Technology, Giza, Egypt.
²Finance Department, College of Management and Technology, Arab Academy for Science and Technology, Alexandria, Egypt.

ABSTRACT

Interest in promoting financial inclusion has increased dramatically in recent years all over the world. The aim of this study is to empirically assess the impact of financial inclusion on the inflation rate in 37 developing countries for a period of 10 years from 2009 to 2018. Initially, Principal Component Analysis (PCA) has been utilized to construct a new multidimensional Financial Inclusion Index (FII) using three dimensions; access, usage, and quality of financial services. Next, 2 step system, Generalized Method of Moments (GMM) was applied to assess the impact of financial inclusion on the inflation rate empirically. The study established that an increased level of financial inclusion has an impact on decreasing the inflation rate in developing countries. It was also found that interest r and official reserves have a significant positive impact on inflation rate. These findings recommend that the policymakers in developing countries should consider financial inclusion as a tool for decreasing the inflation rate and accordingly boost the level of financial inclusion in their countries. Broadening financial inclusion to the informal sector and the rural areas could help in promoting the status of financial inclusion in developing countries.

KEYWORDS

Financial Inclusion, Developing Countries, Inflation Rate, PCA, System GMM

Share and Cite:

Bourainy, M. , Salah, A. and Sherif, M. (2021) Assessing the Impact of Financial Inclusion on Inflation Rate in Developing Countries. Open Journal of Social Sciences, 9, 397-424. doi: 10.4236/jss.2021.91030.

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