The role of financial inclusion in financial stability: lesson from Jordan

  • Received October 15, 2018;
    Accepted November 5, 2018;
    Published November 12, 2018
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  • Article Info
    Volume 13 2018, Issue #4, pp. 31-39
  • Cited by
    22 articles

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This work is licensed under a Creative Commons Attribution 4.0 International License

This study aims to examine the relationship between financial inclusion and financial stability in Jordan by using Fully Modified Least Squares (FMOLS) technique. The analysis is based on time series from 2006 to 2017. Jordanian financial inclusion index is developed to assess the level of financial inclusion, whereas financial stability was measured by Jordanian financial stability index proposed by Central Bank of Jordan. The results show a weak significant and positive impact of financial inclusion on the financial stability in Jordan. Additionally, five control variables are used in the study. The results show a negative impact of domestic credit to private sector, income inequality, financial integration, and global financial crisis on financial stability. In contrast, real GDP per capita has a significant and positive impact. It is expected that the findings of the study can be used by policy makers and supervising authorities to realize the objectives of the national strategy of financial inclusion in Jordan.

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    • Table 1. Indicators of the JFII dimension
    • Table 2. Variables of the study
    • Table 3. Results of multicollinearity test
    • Table 4. Results of unit root test
    • Table 5. Results of Philips-Ouliaris test
    • Table 6.Results of FMOLS regression
    • Table 7. Results of FMOLS regression