Does Financial Inclusion Strengthen the Role of Monetary Policy Effectiveness?

Rizq Nahdah Syahwa Praba

Abstract


The purpose of this study is to determine how the financial inclusion index (FII) affects monetary policy efficacy in emerging Asian nations. Learn. The Fixed Effects Model is used in the analytical model. The findings show that the money supply, currency rate, and financial inclusion index all have a negative but negligible impact on inflation. In the meanwhile, inflation is positively and significantly impacted by interest rates. Monetary stability is empirically negatively impacted by IFI. The negative correlation between IFI and inflation suggests that raising IFI helps keep inflation under control, enhancing the efficacy of monetary policy. Based on the analysis of the empirical results, it shows two things: first, the implication of any sustainable development of financial inclusion requires appropriate circumstances; second, efforts in amplifying financial inclusion need to pay attention to the dynamics of financial inclusion, context, and economic conditions.

JEL:  E52, G21, 016


Keywords


Index financial inclusion, Developing Asia, Monetary policy

Full Text:

PDF
rticle

References


Arshad, M. U., Ahmed, Z., Ramzan, A., Shabbir, M. N., Bashir, Z., & Khan, F. N. (2021). Financial inclusion and monetary policy effectiveness: A sustainable development approach of developed and under-developed countries. PLoS ONE, 16(12 December), 1–19. https://doi.org/10.1371/journal.pone.0261337

Azwar Iskandar Umar. (2017). Index of Syariah Financial Inclusionin Indonesia. Buletin Ekonomi Moneter Dan Perbankan, 20, 99–127.

Jungo, J., Madaleno, M., & Botelho, A. (2022). The Relationship between Financial Inclusion and Monetary Policy: A Comparative Study of Countries’ in Sub-Saharan Africa and Latin America and the Caribbean. Journal of African Business, 23(3), 794–815. https://doi.org/10.1080/15228916.2021.1930810

Khan, M. A., Khan, Z., & Saleem, S. F. (2023). Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development. Journal of Financial Economic Policy, 15(3), 226–247. https://doi.org/10.1108/JFEP-01-2023-0021

Komala, M. D., & Widodo, W. (2022). The Nexus between Financial Inclusion and Monetary Policy: The Case Study of Selected ASEAN Countries. Journal of Economics, Business, & Accountancy Ventura, 25(1), 123–134. https://doi.org/10.14414/jebav.v25i1.2920

Lapukeni, A. F. (2015). The impact of financial inclusion on monetary policy effectiveness: The case of Malawi. International Journal of Monetary Economics and Finance, 8(4), 360–384. https://doi.org/10.1504/IJMEF.2015.073229

Mittal, R., Kathuria, T., Saini, M., Dhingra, B., & Yadav, M. (2023). Effect of financial inclusion and fintech on the effectiveness of Indian monetary policy: an empirical investigation. International Journal of Social Economics, 50(12), 1702–1718. https://doi.org/10.1108/IJSE-01-2023-0034

Oanh, T. T. K., Van, L. T. T., & Dinh, L. Q. (2023). Relationship between financial inclusion, monetary policy and financial stability: An analysis in high financial development and low financial development countries. Heliyon, 9(6), e16647. https://doi.org/10.1016/j.heliyon.2023.e16647

Sethy, S. K., Sethi, N., & Joshi, D. P. P. (2025). Does financial inclusion improve the effectiveness of monetary policy in South Asian countries? Exploring the role of interest rate. Journal of Financial Economic Policy. https://doi.org/10.1108/JFEP-07-2024-0195

Sha’ban, M., Ayadi, R., Forouheshfar, Y., Challita, S., & Sandri, S. (2024). Digital and traditional financial inclusion: Trends and drivers. Research in International Business and Finance, 72(PB), 102528. https://doi.org/10.1016/j.ribaf.2024.102528

Takyi, P. O., Sakyi, D., Yusif, H., Asante, G. N., Osei-Fosu, A. K., & Mensah, G. (2024). Financial inclusion and financial development: implications for monetary policy effectiveness and economic growth in sub-Saharan Africa. Journal of Economic and Administrative Sciences, Idl. https://doi.org/10.1108/JEAS-09-2022-0215

Zanfack, L. T., Ngounou, B. A., Noubissi Domguia, E., & Possi Tebeng, E. X. (2024). Financial stability in sub-Saharan Africa: Does monetary policy matter? Heliyon, 10(15), e34786. https://doi.org/10.1016/J.HELIYON.2024.E34786




DOI: https://doi.org/10.20961/bfde.v6i2.105953

Refbacks

  • There are currently no refbacks.


Copyright (c) 2025 Bulletin of Fintech and Digital Economy

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.