TITLE:
Financial Inclusion and Economic Growth in WAEMU: A Multiscale Heterogeneity Panel Causality Approach
AUTHORS:
Grakolet Arnold Z. Gourène, Pierre Mendy
KEYWORDS:
Financial Inclusion, Economic Growth, Time Scales, Heterogeneity Panel Causality, MODWT
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.3,
March
12,
2019
ABSTRACT: This paper examines the causal relationship between Financial
Inclusion and economic growth in the West African Economic and Monetary Union
(WAEMU) from 2006 to 2015. We combined the heterogeneity panel causality test
proposed by [1] with the Maximal Overlap Discrete Wavelet Transform (MODWT) to
analyze the bi-directional causality at different time scales. We used two
Financial Inclusion indicators: the overall rate of demographic penetration of
financial services (Financial Inclusion supply) and the overall rate of use of
financial services (Financial Inclusion demand). Our results show that at scale
1 (2 - 4 years), there is no
causality between economic growth and Financial Inclusion indicators. However,
at scale 2 (4 - 8 years), we found a
bi-directional causality between economic growth and Financial Inclusion.
Policymakers should therefore promote reforms that are beneficial to financial
inclusion, especially on the supply side, while making the levers for
macroeconomic growth more efficient, which also seems to be a decisive factor
in financial inclusion.