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The impact of financial inclusion on monetary policy effectiveness: the case of Malawi

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  • Angella Faith Lapukeni

Abstract

Financial inclusion is critical as it leads to an improved reach and effectiveness of monetary policy. The paper used quarterly data for Malawi to conduct empirical analysis of the impact of financial inclusion on monetary policy effectiveness. Using vector autoregression model (VAR), granger causality tests, and basic trend analyses, the study revealed consistent trends and some causality between financial inclusion indicators and inflation: the indicator for monetary policy effectiveness. The results further showed that money supply had an inverse relationship with inflation contrary to economic theory. The findings suggest that this is because the accounting of monetary aggregates does not include the activities of those outside the banking system. With this in view, the study concludes that financial inclusion will enable monetary policy to extend its reach to the financially excluded and aid policy makers to make better predictions of movements in inflation using monetary statistics.

Suggested Citation

  • Angella Faith Lapukeni, 2015. "The impact of financial inclusion on monetary policy effectiveness: the case of Malawi," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 8(4), pages 360-384.
    • Handle: RePEc:ids:ijmefi:v:8:y:2015:i:4:p:360-384
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    Citations

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    Cited by:

    1. Jeleta Kebede & Saroja Selvanathan & Athula Naranpanawa, 2024. "Financial inclusion and monetary policy effectiveness in a monetary union: Heterogenous panel approach," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 32(3), pages 779-805, July.
    2. Tonuchi E. Joseph & Nwolisa U. Chinyere & Obikaonu C. Pauline & Alase, A. Gbenga, 2021. "Monetary Policy Effectiveness and Financial Inclusion in Nigeria: FinTech, ‘the Disrupter’ or ‘Enabler’," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 9(1), pages 19-27.
    3. Muhammad Usman Arshad & Zeeshan Ahmed & Ayesha Ramzan & Muhammad Nadir Shabbir & Zahid Bashir & Fahad Najeeb Khan, 2021. "Financial inclusion and monetary policy effectiveness: A sustainable development approach of developed and under-developed countries," PLOS ONE, Public Library of Science, vol. 16(12), pages 1-19, December.
    4. Carla Fernandes & Maria Rosa Borges & Esselina Macome & Jorge Caiado, 2021. "The relationship between Financial Inclusion and Monetary Stability in Mozambique: Analysis based on an Error Correction Model (VECM)," Working Papers Department of Economics 2021/01, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    5. , Le Thanh Tung, 2021. "Fiscal Policy, Monetary Policy and Price Volatility: Evidence from an Emerging Economy," OSF Preprints 7u56v, Center for Open Science.

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