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Does economic policy uncertainty impedes financial inclusion in BRICS economies: the mediating role of quality of governance

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Abstract

Financial inclusion is critical in extending financial services to even the most remote people, thereby contributing to economic prosperity by creating revenues. Nevertheless, researchers all across the world have discovered that economic and financial events frequently disrupt financial inclusion. Considering the growing importance of financial inclusion, the current study attempts to analyze how economic policy uncertainty influences financial inclusion in BRICS countries. Moreover, the study also examines the moderating role of quality of governance on the nexus of financial inclusion and economic policy uncertainty. In order to attain the above objectives, the study employs a two-step system-generalized method of moments. In addition, the study employs SELPDM method as a robustness measure on the panel data spanning from 2004 to 2021. The empirical outcome reveals that high economic policy uncertainty reduces financial inclusion in BRICS countries. However, when the index of quality of governance, constructed using principal component analysis, interacts with economic policy uncertainty, it moderates detrimental impact of economic policy uncertainty on financial inclusion. The finding assists in understanding the nexus of financial inclusion and economic policy uncertainty. Moreover, it also helps policymakers to comprehend the moderating role of quality of governance on the nexus of financial inclusion and economic policy uncertainty and offers valuable recommendations. The study is an original work and offers several policy recommendations.

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Author information

Authors and Affiliations

  1. Institute of Management Commerce and Economics, Shri Ramswaroop Memorial University, Barabanki, India

    Aamir Aijaz Syed

  2. School of Economics and Management, Hainan Normal University, Haikou, People’s Republic of China

    Assad Ullah

  3. Department of Economics, Abdul Wali Khan University, Mardan, Pakistan

    Muhammad Abdul Kamal

Authors
  1. Aamir Aijaz Syed
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  2. Assad Ullah
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  3. Muhammad Abdul Kamal
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Correspondence to Aamir Aijaz Syed.

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Appendix 1: Robustness test

Appendix 1: Robustness test

 

OLS

SELPDM

OLS

SELPDM

Variables

ATM per 100,000 adults

ATM per 100,000 adults

Bank branches per 100,000 adults

Bank branches per 100,000 adults

D.V

    

ATMt−1

0.378*** (4.19)

0.562*** (3.10)

  

BBt−1

  

0.284*** (2.47)

0.619 ** (3.78)

I.V

    

EPU

 − 0.046** (− 2.09)

 − 0.067*** (− 5.19)

 − 0.067** (− 3.81)

 − 0.067*** (− 5.12)

QOG

0.032** (2.12)

0.038* (3.12)

0.075** (4.29)

0.059** (3.90)

EPU*QOG

0.052** (5.15)

0.031** (4.28)

0.059** (2.99)

0.049** (2.18)

RL

0.051***(2.45)

0.043*** (7.20)

0.033*** (5.19)

0.057*** (5.19)

EPU*RL

0.062***(4.18)

0.062** (3.68)

0.047** (4.06)

0.058** (4.32)

RQ

0.053*** (3.19)

0.061*** (4.18)

0.034** (5.91)

0.067** (7.90)

EPU*RQ

0.031** (3.94)

0.056** (4.92)

0.051** (4.02)

0.048** (2.82)

CC

0.029*** (4.82)

0.021** (3.01)

0.027*** (4.11)

0.034** (5.09)

EPU*CC

0.065** (6.18)

0.018** (5.17)

0.044*** (5.72)

0.052** (4.10)

P.S

0.037*** (5.86)

0.020*** (6.19)

0.035*** (4.61)

0.037*** (4.99)

EPU*PS

0.039** (2.29)

0.038** (4.09)

0.058** (5.02)

0.051** (5.87)

G.E

0.045*** (2.78)

0.014*** (5.07)

0.061*** (4.83)

0.063*** (6.04)

EPU*GE

0.032** (4.02)

0.041** (6.10)

0.039** (5.74)

0.056*** (5.18)

V.A

0.028*** (5.16)

0.029*** (4.77)

0.019** (4.09)

0.049* (4.95)

EPU*V.A

0.034*** (4.27)

0.041*** (4.60)

0.024** (6.18)

0.073** (6.09)

C.V

    

GDP

0.068** (5.11)

0.048** (2.18)

0.049*** (4.18)

0.058** (4.09)

INF

 − 0.004(− 2.19)

 − 0.005 ** (− 3.89)

 − 0.006** ( 2.08)

 − 0.008** (− 3.67)

INT

 − 0.002(− 3.91)

 − 0.008 (− 2.38)

 − 0.002 (− 6.81)

 − 0.032(− 3.58)

Constant

0.519** (4.17)

3.076** (5.03)

0.532** (4.38)

5.097** (3.75)

Hansen J prob-value

 

0.309

 

0.607

AR(2) prob-value

 

0.745

 

0.723

  1. Authors’ calculations and t-value are shown in the brackets; ***, **, and * denote significance level at 1%, 5%, and 10%

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Syed, A.A., Ullah, A. & Kamal, M.A. Does economic policy uncertainty impedes financial inclusion in BRICS economies: the mediating role of quality of governance. Econ Change Restruct 57, 11 (2024). https://doi.org/10.1007/s10644-024-09596-y

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