{"title":"Optimal financial inclusion for financial stability: Empirical insight from developing countries","authors":"Meriem Sebai, Omar Talbi, Hella Guerchi-Mehri","doi":"10.1016/j.frl.2024.106467","DOIUrl":null,"url":null,"abstract":"<div><div>This paper investigates the impact of financial inclusion on financial stability in 26 developing countries from 2004 to 2020. Using a panel smooth transition regression model, the results reveal a nonlinear relationship between financial inclusion and financial stability. Initially, financial inclusion enhances banking stability. However, beyond a certain point, increased financial inclusion gradually diminishes financial stability, exhibiting an inverted U-shaped relationship. These findings emphasize the importance of adopting a balanced financial inclusion strategy and an adaptive regulatory framework to mitigate potential risks to overall financial stability.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"71 ","pages":"Article 106467"},"PeriodicalIF":7.4000,"publicationDate":"2024-11-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S154461232401496X","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This paper investigates the impact of financial inclusion on financial stability in 26 developing countries from 2004 to 2020. Using a panel smooth transition regression model, the results reveal a nonlinear relationship between financial inclusion and financial stability. Initially, financial inclusion enhances banking stability. However, beyond a certain point, increased financial inclusion gradually diminishes financial stability, exhibiting an inverted U-shaped relationship. These findings emphasize the importance of adopting a balanced financial inclusion strategy and an adaptive regulatory framework to mitigate potential risks to overall financial stability.
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