Abstract
This study empirically explores short run and long run causality between institutional financial inclusion and income inequality in 22 members of European Union (EU) divided in two subpanels: Old EU members and New EU Member states (NMS). A panel VECM (PVECM) approach is utilized to re-examine the nexus between financial inclusions on income inequality and empirically determines direction of their causal relationship. The current level of financial inclusion in the old EU members only through expansion ATMs services lead to decrease income inequality in long run while it contributes through expansion commercial bank branches in short run. On the contrary, the study finds weak and subdue effect financial inclusion on income inequality in the NMS countries in long run, while only expansion commercial bank branches lead to decrease income inequality in short run. Generally, the results show that financial inclusion measured by commercial bank branches contributes to more equal income distribution for the both regions, in the short run. The final implications of this study are that policies of financial inclusions can reduce of inequality in the long run confirmed, particularly in the old EU countries.
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Article Details
- Year: 2023
- Volume: 44
- Issue: 3
- Pages: 21 - 44
- Accepted: 20.01.2023
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DOI:
https://doi.org/10.5281/zenodo.16902846 -
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How to Cite?
Mehmed Ganić (2023). The Nexus between Financial Inclusion and Income Inequality: An Empirical Evidence from the European Union. Journal of Economic Cooperation and Development, 44(3), 21-44. https://doi.org/10.5281/zenodo.16902846
