Title: The effect of financial inclusion on unemployment reduction - evidence from non-oil producing Arab countries

Authors: Nooh Alshyab; Serena Sandri; Demeh Daradkah

Addresses: Faculty of Economics and Administrative Sciences, Yarmouk University, Difaa Al Madani Street, 21163 Irbid, Jordan ' School of Management and Logistic Sciences, German Jordanian University, Amman Madaba Street, 11180 Amman, Jordan ' Faculty of Economics and Administrative Sciences, Yarmouk University, Difaa Al Madani Street, 21163 Irbid, Jordan

Abstract: The non-oil producing Arab countries of the Middle East and North Africa are suffering from chronic high unemployment rates, especially among the youth. The availability of affordable and secure financial services is considered as one of the pillars for generating economic growth, stimulating job creation and reducing unemployment. This study investigates the link between financial inclusion and unemployment in non-oil exporting Arab countries. This is done via estimating an index for financial inclusion from 2008 to 2018 for Egypt, Jordan, Lebanon, Morocco, and Tunisia based on the methodology developed by Sarma. The estimated index reveals an overall average-to-low level of financial inclusion. The effect of financial inclusion on unemployment is then tested based on a modified version of Okun's law. The results of a random effect model reveal a significant negative effect both of financial inclusion and of real output growth on unemployment.

Keywords: financial inclusion; unemployment; Okun's law; random effect model; REM; non-oil exporting Arab countries.

DOI: 10.1504/IJBPM.2021.116409

International Journal of Business Performance Management, 2021 Vol.22 No.2/3, pp.100 - 116

Received: 11 Jun 2020
Accepted: 15 Oct 2020

Published online: 19 Jul 2021 *

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