Nexus between financial inclusion, workers’ remittances, and unemployment rate in Asian economies

Abstract

Unemployment is one of the biggest macroeconomic issues, and economists and policymakers have provided various options to tackle this menace. Financial inclusion and remittances are an important part of any economy and help increase the level of employment. However, despite extensive research, several gaps and issues in understanding the intricate relationship between financial inclusion, workers’ remittances, and the unemployment rate in Asian economies persist. This paper seeks to bridge these gaps and address the issues by examining the relationship between financial inclusion, workers’ remittances, and the unemployment rate in Asian economies using rigorous econometric methodologies, such as two-stage least squares (2SLS) and generalized method of moments (GMM) methods. The findings of 2SLS and GMM demonstrate that ATM, remittances, internet users, GDP, and financial globalization adversely influence the unemployment levels in Asia, Central Asia, East Asia, Southeast Asia, West & Middle East Asia, and South Asia in 2SLS and GMM models. However, the influence of inflation on the unemployment level is favourable in some regions. Therefore, it is important to give priority to policies that encourage financial inclusion, such as increasing underprivileged populations’ access to banking services, credit, and insurance. Moreover, reducing transaction costs, streamlining money transfers, and promoting formal remittance channels can boost remittances.