Dynamic common correlated effects of financial inclusion on economic growth: empirical evidence from Organization of Islamic Cooperation (OIC) countries
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 15 February 2023
Abstract
Purpose
Financial inclusion is a critical component of financial development, which disseminates accessible financial services to benefit all parts of society and consequently promotes economic growth. The study explores the dynamic common correlated effects of financial inclusion on economic growth in Organization of Islamic Cooperation (OIC) countries.
Design/methodology/approach
The conventional econometric techniques overlook heterogeneity and cross-sectional dependence and provide false results. Hence, a unique methodology, ‘Dynamic Common Correlated Effects (DCCE)’, is used, which can efficiently tackle the above-mentioned issues.
Findings
The DCCE estimation indicates a positive and significant impact of financial inclusion on economic growth in overall and higher-income OIC economies. Moreover, in the lower-income OIC group, financial inclusion is inversely correlated with economic growth, which converts into a positive linkage by including an interaction term of financial inclusion and institutional quality.
Practical implications
Based on the research outcomes, it is recommended that policymakers and governments of OIC economies seek to increase financial inclusion to achieve sustainable, optimal and inclusive economic growth.
Originality/value
The DCCE technique in this study considers heterogeneity and cross-sectional dependence among countries and thus provides robust findings.
Keywords
Acknowledgements
This paper is a part of the first author’s thesis for his PhD in Finance from Putra Business School, UPM, Malaysia.
Declarations:, Competing interests: There are no relevant financial or non-financial interests to disclose for the authors.
Availability of data: The datasets used in this study are available upon reasonable request from the corresponding author.
Funding: No funding was received for conducting this study.
Conflict of interest: The corresponding author declares that there is no conflict of interest with this manuscript on behalf of all authors.
Citation
Chaudhry, I.S., Yusop, Z. and Habibullah, M.S. (2023), "Dynamic common correlated effects of financial inclusion on economic growth: empirical evidence from Organization of Islamic Cooperation (OIC) countries", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-11-2021-1751
Publisher
:Emerald Publishing Limited
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