Financial inclusion and financial development: implications for monetary policy effectiveness and economic growth in sub-Saharan Africa
Journal of Economic and Administrative Sciences
ISSN: 1026-4116
Article publication date: 11 May 2023
Abstract
Purpose
This paper explores the implications of financial inclusion and financial development for the conduct of monetary policy in achieving price stability and economic growth in sub-Saharan Africa (SSA).
Design/methodology/approach
The paper employs the system-generalized methods of moment (GMM) estimation technique using panel data spanning 2004 to 2019 and sourced from Databases of (International Monetary Fund's) IMF's Financial Access Survey (FAS), IMF's International Financial Statistics (IFS), World Bank's Global Financial Development Database (GFDD) and World Bank's World Development Indicators (WDI).
Findings
The authors find that financial inclusion has a double-edge effect in SSA. That is, it increases economic growth and lowers inflation in SSA. Furthermore, the results show that a simultaneous increase in financial inclusion and financial development have restrictive effects on economic growth. On the evidence provided, the authors conclude that financial inclusion is an important predictor of economic growth and the conduct of monetary policy in the sub-region.
Originality/value
This paper expands and contributes to the frontier of knowledge how financial inclusion is important for the conduct of monetary policy by monetary authorities in achieving its intended objectives in SSA. The paper highlights the need for ongoing enhancement of financial inclusion of many governments in the sub-region to achieving high economic growth and price stability. Thus, there is the need for policy makers to ensure that a more stringent, effective and appropriate policies and measures are put in place to enhance financial inclusion while taking into consideration the extent of financial development in SSA.
Keywords
Acknowledgements
The authors acknowledge financial support from the Institute of Distance Learning (IDL), Kwame Nkrumah University of Science and Technology, Kumasi, Ghana.
Citation
Takyi, P.O., Sakyi, D., Yusif, H., Asante, G.N., Osei-Fosu, A.K. and Mensah, G. (2023), "Financial inclusion and financial development: implications for monetary policy effectiveness and economic growth in sub-Saharan Africa", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-09-2022-0215
Publisher
:Emerald Publishing Limited
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