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Dynamic common correlated effects of financial inclusion on economic growth: empirical evidence from Organization of Islamic Cooperation (OIC) countries

Imran Sharif Chaudhry (School of Economics, Bahauddin Zakariya University, Multan, Pakistan) (Putra Business School, UPM, Serdang, Malaysia)
Zulkornain Yusop (Universiti Technology Mara, Shah Alam, Malaysia)
Muzafar Shah Habibullah (Putra Business School, UPM, Serdang, Malaysia)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 15 February 2023

175

Abstract

Purpose

Financial inclusion is a critical component of financial development, which disseminates accessible financial services to benefit all parts of society and consequently promotes economic growth. The study explores the dynamic common correlated effects of financial inclusion on economic growth in Organization of Islamic Cooperation (OIC) countries.

Design/methodology/approach

The conventional econometric techniques overlook heterogeneity and cross-sectional dependence and provide false results. Hence, a unique methodology, ‘Dynamic Common Correlated Effects (DCCE)’, is used, which can efficiently tackle the above-mentioned issues.

Findings

The DCCE estimation indicates a positive and significant impact of financial inclusion on economic growth in overall and higher-income OIC economies. Moreover, in the lower-income OIC group, financial inclusion is inversely correlated with economic growth, which converts into a positive linkage by including an interaction term of financial inclusion and institutional quality.

Practical implications

Based on the research outcomes, it is recommended that policymakers and governments of OIC economies seek to increase financial inclusion to achieve sustainable, optimal and inclusive economic growth.

Originality/value

The DCCE technique in this study considers heterogeneity and cross-sectional dependence among countries and thus provides robust findings.

Keywords

Acknowledgements

This paper is a part of the first author’s thesis for his PhD in Finance from Putra Business School, UPM, Malaysia.

Declarations:, Competing interests: There are no relevant financial or non-financial interests to disclose for the authors.

Availability of data: The datasets used in this study are available upon reasonable request from the corresponding author.

Funding: No funding was received for conducting this study.

Conflict of interest: The corresponding author declares that there is no conflict of interest with this manuscript on behalf of all authors.

Citation

Chaudhry, I.S., Yusop, Z. and Habibullah, M.S. (2023), "Dynamic common correlated effects of financial inclusion on economic growth: empirical evidence from Organization of Islamic Cooperation (OIC) countries", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-11-2021-1751

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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