IDEAS home Printed from https://ideas.repec.org/a/bdy/modfin/v2y2024i1p84-100id107.html
   My bibliography  Save this article

Financial inclusion and monetary policy targets: Evidence from the ECOWAS countries

Author

Listed:
  • Tuwe Soro Garbobiya
  • Olajide Oladipo
  • Paul Terhemba Iorember

Abstract

The study examines the impact of financial inclusion on monetary policy targets in the Economic Community of West African States for the period between 2004 and 2020. To capture how a shock to financial inclusion affects monetary policy targets in the ECOWAS sub-region, the study employs panel vector autoregression via the Generalized Method of Moments framework and uses the impulse response functions. The results show that in all ECOWAS countries, financial inclusion leads to an appreciation of the local currency, thereby improving the value of the exchange rate. However, it reduces the effectiveness of monetary policy. In particular, financial inclusion increases consumer prices and interest rates. Based on the findings, the study recommends, among others, the need for a single monetary policy in the ECOWAS sub-region to properly integrate its monetary policy framework in line with the economic and monetary integration policy of the West African Monetary Zone.

Suggested Citation

  • Tuwe Soro Garbobiya & Olajide Oladipo & Paul Terhemba Iorember, 2024. "Financial inclusion and monetary policy targets: Evidence from the ECOWAS countries," Modern Finance, Modern Finance Institute, vol. 2(1), pages 84-100.
    • Handle: RePEc:bdy:modfin:v:2:y:2024:i:1:p:84-100:id:107
    as

    Download full text from publisher

    File URL: https://mf-journal.com/article/view/107/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ogechi Adeola & Olaniyi Evans, 2017. "Financial inclusion, financial development, and economic diversification in Nigeria," Journal of Developing Areas, Tennessee State University, College of Business, vol. 51(3), pages 1-15, July-Sept.
    2. Peterson Kitakogelu Ozili, 2021. "Has financial inclusion made the financial sector riskier?," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 29(3), pages 237-255, January.
    3. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    4. Peterson K. Ozili & Paul Terhemba Iorember, 2024. "Financial stability and sustainable development," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 2620-2646, July.
    5. Mr. Kangni R Kpodar & Mihasonirina Andrianaivo, 2011. "ICT, Financial Inclusion, and Growth: Evidence from African Countries," IMF Working Papers 2011/073, International Monetary Fund.
    6. Hayakawa, Kazuhiko, 2016. "Improved GMM estimation of panel VAR models," Computational Statistics & Data Analysis, Elsevier, vol. 100(C), pages 240-264.
    7. Peterson K. Ozili, 2022. "Financial inclusion and sustainable development: an empirical association," Journal of Money and Business, Emerald Group Publishing Limited, vol. 2(2), pages 186-198, September.
    8. Peterson K. Ozili & Adekemi Ademiju & Semia Rachid, 2022. "Impact of financial inclusion on economic growth: review of existing literature and directions for future research," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 50(8), pages 1105-1122, October.
    9. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simona Elena Ciobanu, 2024. "Financial Inclusion and Monetary Policy: A Review of Literature," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 314-324.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ibrahim D. Raheem & Aviral K. Tiwari & Daniel Balsalobre-lorente, 2019. "The Role of ICT and Financial Development on CO2 Emissions and Economic Growth," Working Papers of the African Governance and Development Institute. 19/058, African Governance and Development Institute..
    2. Ryan H. Murphy & Colin O’Reilly, 2019. "Applying panel vector autoregression to institutions, human capital, and output," Empirical Economics, Springer, vol. 57(5), pages 1633-1652, November.
    3. Bu, Fan & wu, Hong & Mahmoud, Haitham A. & Alzoubi, Haitham M. & Ramazanovna, Nargiza Kuzieva & Gao, Yirui, 2023. "Do financial inclusion, natural resources and urbanization affect the sustainable environment in emerging economies," Resources Policy, Elsevier, vol. 87(PA).
    4. Cem Ertur & Antonio Musolesi, 2017. "Weak and Strong Cross‐Sectional Dependence: A Panel Data Analysis of International Technology Diffusion," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(3), pages 477-503, April.
    5. Kolawole Ogundari & Shoichi Ito & Victor O Okoruwa, 2016. "Estimating nutrition-income elasticities in sub-Saharan Africa: implications on health," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 43(1), pages 59-69, January.
    6. repec:zbw:rwirep:0557 is not listed on IDEAS
    7. Emmanuel Anyigbah & Yusheng Kong & Bless Kofi Edziah & Ahotovi Thomas Ahoto & Wilhelmina Seyome Ahiaku, 2023. "Board Characteristics and Corporate Sustainability Reporting: Evidence from Chinese Listed Companies," Sustainability, MDPI, vol. 15(4), pages 1-26, February.
    8. Lin, Boqiang & Okoye, Jude O., 2023. "Towards renewable energy generation and low greenhouse gas emission in high-income countries: Performance of financial development and governance," Renewable Energy, Elsevier, vol. 215(C).
    9. Dongwon Lee & Yu-chin Chen, 2014. "What Makes a Commodity Currency?," Working Papers 201420, University of California at Riverside, Department of Economics.
    10. Hosan, Shahadat & Rahman, Md Matiar & Karmaker, Shamal Chandra & Saha, Bidyut Baran, 2023. "Energy subsidies and energy technology innovation: Policies for polygeneration systems diffusion," Energy, Elsevier, vol. 267(C).
    11. Gangopadhyay, Partha & Jain, Siddharth & Bakry, Walid, 2022. "In search of a rational foundation for the massive IT boom in the Australian banking industry: Can the IT boom really drive relationship banking?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    12. Dong, Kangyin & Sun, Renjin & Li, Hui & Liao, Hua, 2018. "Does natural gas consumption mitigate CO2 emissions: Testing the environmental Kuznets curve hypothesis for 14 Asia-Pacific countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 419-429.
    13. László KÓNYA, 2023. "Per Capita Income Convergence and Divergence of Selected OECD Countries to and from the US: A Reappraisal for the period 1900-2018," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 23(1), pages 33-56.
    14. Antonio Afonso & Hüseyin Sen & Ayse Kaya, 2021. "Government Size, Unemployment and Inflation Nexus in Eight Large Emerging Market Economies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 235(1), pages 133-170, March.
    15. Joakim Westerlund, 2016. "An IV Test for a Unit Root in Generally Trending and Correlated Panels," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(5), pages 752-764, October.
    16. Peterson K. Ozili & David Mhlanga, 2024. "Why is financial inclusion so popular? An analysis of development buzzwords," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(1), pages 231-253, January.
    17. Palm, Franz C. & Smeekes, Stephan & Urbain, Jean-Pierre, 2011. "Cross-sectional dependence robust block bootstrap panel unit root tests," Journal of Econometrics, Elsevier, vol. 163(1), pages 85-104, July.
    18. Ben-Salha, Ousama & Dachraoui, Hajer & Sebri, Maamar, 2021. "Natural resource rents and economic growth in the top resource-abundant countries: A PMG estimation," Resources Policy, Elsevier, vol. 74(C).
    19. Mohamed AROURI & Christophe RAULT, 2009. "On the Influence of Oil Prices on Stock Markets: Evidence from Panel Analysis in GCC Countries," LEO Working Papers / DR LEO 1299, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    20. Du, Xiaodong & Hayes, Dermot J., 2009. "The impact of ethanol production on US and regional gasoline markets," Energy Policy, Elsevier, vol. 37(8), pages 3227-3234, August.
    21. In Choi, 2019. "Unit Root Tests for Dependent Micropanels," The Japanese Economic Review, Springer, vol. 70(2), pages 145-167, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bdy:modfin:v:2:y:2024:i:1:p:84-100:id:107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Adam Zaremba (email available below). General contact details of provider: https://mf-journal.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.