Title: Do financial stability and institutional quality have impact on financial inclusion in developing economies? A new evidence from Nigeria

Authors: Onyinye I. Anthony-Orji; Anthony Orji; Jonathan E. Ogbuabor; Emmanuel O. Nwosu

Addresses: Department of Economics, University of Nigeria, Nsukka, Nigeria ' Department of Economics, University of Nigeria, Nsukka, Nigeria ' Department of Economics, University of Nigeria, Nsukka, Nigeria ' Department of Economics, University of Nigeria, Nsukka, Nigeria

Abstract: This paper investigates the empirical linkages among financial stability, institutional quality and financial inclusion in Nigeria using quarterly data from 1986-2013. For empirical analysis, the study applies the autoregressive distributed lag model based on unrestricted error correction model (ARDL-UECM). First, the results show evidence that financial stability has significant impact on financial inclusion in the long run period but not in the short run. Second, the study reveals that institutional quality has significant impact on financial inclusion in the long run period and in the short run. Having found that financial stability and institutional quality are positively related to financial inclusion in the long run, the study therefore recommends that the government and policymakers pursuing the agenda of financial inclusion should pay attention not only to the financial and economic indicators but also to institutional factors existing in the country since they interact in creating a harmonised and sustainable developmental trajectory. In a country where the economic, legal, judicial and political institutions are very weak, many households (savers) and firms (borrowers/investors) may not be protected when there are issues of financial contract enforcements or breaches within the economy.

Keywords: financial stability; institutional quality; financial inclusion; autoregressive distributed lag; ARDL.

DOI: 10.1504/IJSE.2019.096541

International Journal of Sustainable Economy, 2019 Vol.11 No.1, pp.18 - 40

Received: 16 Feb 2018
Accepted: 25 Apr 2018
Published online: 05 Dec 2018 *

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