Economic Growth, Financial Inclusion and Political Institutions: A Global Perspective

Abstract

There is a bulk of studies available that deals with the determinants of economic growth with different perspective but there is no serious attempt has yet been made that consider financial inclusion and political institutions linkages with economic growth. The study in hand comprehensively examining these two exclusive sources of variation in economic growth and provides better understanding of linkages among each other. Different panel data sets of 185 countries are used to examine these relationships covering the period 1996 to 2015. As far as the econometric technique is concerned, we applied fixed effect model on the basis of Hausman test. Furthermore, two stage least square method is applied for deep parameter analysis. The results states that financial inclusion and political institutions have positive impacts on the economic growth. Additionally, the results showing robustness when we applied different econometric techniques for instance, fixed effect, random effect etc. Deepening financial inclusion through providing credit facilities at disaggregate level as well as strengthening the political institutions to ensure regulatory framework at aggregate level is a route to economic growth.