IMF Working Papers

A Confidence-Financial Inclusion Nexus in the Caucasus and Central Asia?

By Kalin I Tintchev, Kady Keita

December 20, 2024

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Format: Chicago

Kalin I Tintchev, and Kady Keita. "A Confidence-Financial Inclusion Nexus in the Caucasus and Central Asia?", IMF Working Papers 2024, 257 (2024), accessed February 7, 2025, https://doi.org/10.5089/9798400292712.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We document novel evidence that confidence in macrofinancial stability has a positive impact on financial inclusion in CCA countries and more broadly. This channel is particularly important for CCA countries, with confidence gains of 1 unit leading to 0.7 unit improvement in financial inclusion. Institutional factors such as level of governance and reliance on transparent policy rules and robust financial safety nets explain a large fraction of the variability in confidence in the region. We find that governance reforms are critical for deepening financial inclusion while the impact of inflation targeting, fiscal rules and deposit insurance schemes is positive and material only when governance levels exceed certain thresholds.

Subject: Deposit insurance, Financial crises, Financial inclusion, Financial markets, Financial sector development, Fiscal policy, Fiscal rules, Inflation targeting, Monetary policy

Keywords: CCA country, Central Asia and the Caucasus, Confidence, Deposit insurance, Financial inclusion, Financial sector development, Fiscal rules, Fiscal rules, Global, Governance, Governance gap, Governance level, Governance reform, Inclusion Nexus, Inflation targeting

Publication Details

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