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Does governance quality matter in the nexus of inclusive finance and stability?

Author

Listed:
  • Mallika Saha
  • Kumar Debasis Dutta

Abstract

Purpose - Despite numerous evidence of policy trade-off in financial inclusion-stability nexus, little is known about the role of governance quality to align policy goals and maximizing the social benefits. Therefore, to fill the gap, this study focuses to investigate the moderating effect of country governance (CG) in the interplay between financial-inclusion (FI) and financial-stability (FS), using a large panel of 84 economies covering the years 2004–2017. Design/methodology/approach - For attaining this objective, the study constructs several indexes for FI, FS and CG using principal component analysis (PCA) and examines how FI influences FS at different CG levels applying advanced econometrics. Findings - The results show that CG plays a very crucial role in eradicating the trade-off and strengthens the synergy between FI and FS. The findings are insensitive to several robustness validations and could be constructive for policymakers to devise policies and to ensure financial stability. Originality/value - As far as the authors are aware, this is the only paper that empirically explains CG's role in FI-FS nexus.

Suggested Citation

  • Mallika Saha & Kumar Debasis Dutta, 2022. "Does governance quality matter in the nexus of inclusive finance and stability?," China Finance Review International, Emerald Group Publishing Limited, vol. 13(1), pages 121-139, January.
    • Handle: RePEc:eme:cfripp:cfri-08-2021-0166
    DOI: 10.1108/CFRI-08-2021-0166
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    Citations

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    Cited by:

    1. Kumar Debasis Dutta & Mallika Saha, 2023. "Role of governance in the nexus between financial development and sustainable development," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(6), pages 1181-1215, August.
    2. Sabyasachi Tripathi & Meenakshi Rajeev, 2023. "Gender-Inclusive Development through Fintech: Studying Gender-Based Digital Financial Inclusion in a Cross-Country Setting," Sustainability, MDPI, vol. 15(13), pages 1-34, June.
    3. Wang, Jing, 2023. "Digital inclusive finance and rural revitalization," Finance Research Letters, Elsevier, vol. 57(C).
    4. Wang, Yebin & Gao, Huiyu & Wang, Haijun, 2024. "The digital silk road and trade growth – A quasi-natural experiment based on silk road E-commerce," Research in International Business and Finance, Elsevier, vol. 67(PB).
    5. Mugabil Isayev, 2024. "Unraveling the interplay of financial inclusion, stability, and shadow banking in emerging markets," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-17, April.

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