Title: Does financial inclusion spur growth in BRICS countries? Evidence from a panel smooth transition regression model

Authors: Tafadzwa Ruzive; Charles Wait; Andrew Phiri

Addresses: Department of Economics, Faculty of Business and Economic Studies, Nelson Mandela University, Port Elizabeth, 6031, South Africa ' Department of Economics, Faculty of Business and Economic Studies, Nelson Mandela University, Port Elizabeth, 6031, South Africa ' Department of Economics, Faculty of Business and Economic Studies, Nelson Mandela University, Port Elizabeth, 6031, South Africa

Abstract: The World Bank financial development agenda highlights financial inclusion as a lever for growth. Policymakers in BRICS economies have selected financial inclusion as a policy tool to spur growth. This article analyses the nature and presence of the financial inclusion-growth nexus in BRICS economies over the period 2004-2018. Using a panel smooth transition regression (PSTR) framework, we find that number of automated teller machines (ATMs) positively affect growth and this effect is diminished after crossing its identified threshold; microcredit borrowing has a negative effect on growth which is enhanced after crossing its threshold point; and microfinance savings has a positive effect on growth of which this positive effect is enhanced after crossing its threshold level. Conversely, all measures of financial inclusion are shown to exhibit increasing returns to scale on total factor productivity. These findings are robust to an alternative use indexed measure of financial inclusion constructed using principal component analysis. Policy implications of these findings are discussed.

Keywords: financial inclusion; economic growth; emerging economies; BRICS; panel smooth transition regression; PSTR; automated teller machines; ATMs.

DOI: 10.1504/IJSE.2021.116636

International Journal of Sustainable Economy, 2021 Vol.13 No.3, pp.281 - 305

Received: 23 Sep 2020
Accepted: 11 Jan 2021

Published online: 19 Jul 2021 *

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