The Impact of Financial Inclusion on Economic Growth: ARDL Approach

Abstract

This study investigates the impact of financial inclusion on economic growth in Jordan from 2000 to 2021. Employing an Autoregressive Distributed Lag (ARDL) approach, we examined the temporal relationship between financial inclusion indicators and economic growth. Our analysis reveals a bidirectional causality, indicating that financial inclusion not only propels economic growth but is also bolstered by it. The findings challenge the initial hypothesis of a unidirectional relationship, suggesting a more intricate interaction between financial inclusion and economic prosperity in emerging economies. The Granger causality test results significantly support the notion of mutual reinforcement between these variables. This study contributes to the empirical literature by highlighting the symbiotic relationship within the Jordanian context and suggests that enhancing financial inclusion can be a strategic tool for sustainable economic development. The research also underscores the need for considering environmental implications and the burgeoning digital financial services sector in future policy-making. Suggested future research includes comparative regional studies, incorporation of qualitative methods, and exploration of the environmental impacts of financial inclusion. The study’s conclusions are instrumental for policymakers and stakeholders in crafting informed strategies to leverage financial inclusion for economic growth.