The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economies
Purpose – The purpose of this paper is to evaluate the interest rate (IR) sensitivity of output and prices in developing economies with different levels of financial inclusion (FI) for the period 2007Q1–2017Q4. Design/methodology/approach – By using the PCA method to construct an FI index for each c...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2019-10-01
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| Series: | Journal of Economics and Development |
| Subjects: | |
| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/JED-07-2019-0018/full/pdf?title=the-interest-rate-sensitivity-of-output-and-prices-with-different-levels-of-financial-inclusion-evidence-from-developing-economies |
| _version_ | 1798000925781000192 |
|---|---|
| author | Huong Thi Truc Nguyen |
| author_facet | Huong Thi Truc Nguyen |
| author_sort | Huong Thi Truc Nguyen |
| collection | DOAJ |
| description | Purpose – The purpose of this paper is to evaluate the interest rate (IR) sensitivity of output and prices in developing economies with different levels of financial inclusion (FI) for the period 2007Q1–2017Q4. Design/methodology/approach – By using the PCA method to construct an FI index for each country, the author divides the sample into two groups (high and low FI levels). Then, with panel vector autoregressions on per group estimated to assess the strength of the impulse response of output and prices to IR shock. Findings – The findings show that the impact of an IR shock on output and inflation is greater in economies with a higher degree of FI. Practical implications – The finding indicates the link between FI and the effectiveness of IRs as a monetary policy tool, thereby helping Central banks to have a clearer goal of FI to implement their monetary policy. Originality/value – This study emphasizes the important role of FI in the economy. From there, an FI solution is integrated into the construction and calculation of its impact on monetary policy, improving the efficiency of monetary policy transmission, contributing to price stability and sustainable growth. |
| first_indexed | 2024-04-11T11:27:59Z |
| format | Article |
| id | doaj.art-3d6af630ca8f4bb2913ce85c16cd613b |
| institution | Directory Open Access Journal |
| issn | 1859-0020 2632-5330 |
| language | English |
| last_indexed | 2024-04-11T11:27:59Z |
| publishDate | 2019-10-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | Journal of Economics and Development |
| spelling | doaj.art-3d6af630ca8f4bb2913ce85c16cd613b2022-12-22T04:26:14ZengEmerald PublishingJournal of Economics and Development1859-00202632-53302019-10-0121211413010.1108/JED-07-2019-0018635005The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economiesHuong Thi Truc Nguyen0University of Economics Ho Chi Minh City, Ho Chi Minh City, VietnamPurpose – The purpose of this paper is to evaluate the interest rate (IR) sensitivity of output and prices in developing economies with different levels of financial inclusion (FI) for the period 2007Q1–2017Q4. Design/methodology/approach – By using the PCA method to construct an FI index for each country, the author divides the sample into two groups (high and low FI levels). Then, with panel vector autoregressions on per group estimated to assess the strength of the impulse response of output and prices to IR shock. Findings – The findings show that the impact of an IR shock on output and inflation is greater in economies with a higher degree of FI. Practical implications – The finding indicates the link between FI and the effectiveness of IRs as a monetary policy tool, thereby helping Central banks to have a clearer goal of FI to implement their monetary policy. Originality/value – This study emphasizes the important role of FI in the economy. From there, an FI solution is integrated into the construction and calculation of its impact on monetary policy, improving the efficiency of monetary policy transmission, contributing to price stability and sustainable growth.https://www.emerald.com/insight/content/doi/10.1108/JED-07-2019-0018/full/pdf?title=the-interest-rate-sensitivity-of-output-and-prices-with-different-levels-of-financial-inclusion-evidence-from-developing-economiesfinancial inclusioninterest rate sensitivitymonetary policy transmission mechanism |
| spellingShingle | Huong Thi Truc Nguyen The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economies Journal of Economics and Development financial inclusion interest rate sensitivity monetary policy transmission mechanism |
| title | The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economies |
| title_full | The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economies |
| title_fullStr | The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economies |
| title_full_unstemmed | The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economies |
| title_short | The interest rate sensitivity of output and prices with different levels of financial inclusion: Evidence from developing economies |
| title_sort | interest rate sensitivity of output and prices with different levels of financial inclusion evidence from developing economies |
| topic | financial inclusion interest rate sensitivity monetary policy transmission mechanism |
| url | https://www.emerald.com/insight/content/doi/10.1108/JED-07-2019-0018/full/pdf?title=the-interest-rate-sensitivity-of-output-and-prices-with-different-levels-of-financial-inclusion-evidence-from-developing-economies |
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