(WP1/2018) Financial Inclusion: New Measurement and Cross-Country Impact Assessment

Publication Date : January 2018Authors : Cyn-Young Park and Rogelio Mercado Jr. : : Total Downloads : 35

This paper introduces a new index of financial inclusion for 151 economies using principal component analysis to compute weights for aggregating 9 indicators of access, availability, and usage. It then assesses the impact of financial inclusion on poverty and income inequality. The results provide evidence that high and middle-high-income economies with high financial inclusion have significantly lower poverty, while no such relation exists for middle-low and low-income economies. The nonlinearities in the cross-country determinants and impacts of financial inclusion on poverty and income inequality across income groups are important to choosing the appropriate policies for achieving inclusive growth in different development stages.

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