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Examining the Nexus of Financial Inclusion, Household Consumption, and Economic Growth: A 3SLS Approach

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  • İbrahim Ekmen
  • Yalçın Karatepe

Abstract

The relationship between finance and economy is a long-standing debate in the development literature. While some researchers argue that finance simply follows economic development, others argue that finance is a critical determinant of economic growth. Research findings on this issue vary across countries, periods, data sets, and research methodologies. On the other hand, the relationship between economic growth and financial inclusion is a relatively new area of study in the academic literature. The primary goal of financial inclusion is to ensure that everyone can access and use financial products at an affordable cost. In this context, access to and use of financial products is seen in the context of financial citizenship. This paper examines the impact of digital banking and financial inclusion on economic growth and household consumption in Turkey. For this purpose, financial inclusion and digital banking indices have been constructed. Furthermore, the relationship of these indices with the GDP index and household consumption index is examined using the three-stage least square (3SLS) method with two separate equations. The results show that digital banking and financial inclusion have a positive impact on economic growth and household consumption in Turkey.

Suggested Citation

  • İbrahim Ekmen & Yalçın Karatepe, 2024. "Examining the Nexus of Financial Inclusion, Household Consumption, and Economic Growth: A 3SLS Approach," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 9(1), pages 1-25.
    • Handle: RePEc:ahs:journl:v:9:y:2024:i:1:p:1-25
    DOI: 10.30784/epfad.1433921
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    References listed on IDEAS

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    1. Babatunde Wasiu Adeoye & Raymond Osi Alenoghena, 2019. "Internet Usage, Financial Inclusion and Economic Growth in Nigeria," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 2-12, December.
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      More about this item

      Keywords

      Financial Inclusion Index; Digital Banking Index; Economic Growth; Digital Financial Inclusion; 3SLS; Household Consumption Capital Expenditure;
      All these keywords.

      JEL classification:

      • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
      • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
      • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
      • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
      • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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