Implications of monetary and macroprudential policies on financial Inclusion in EMDEs: do institutional quality and regulation matter?

This study examines the impact of monetary and macroprudential policies on financial inclusion in emerging and developing economies (EMDEs), with a specific focus on the moderating role of institutional quality and regulations. This study further assesses the heterogeneous effects of policy changes on financial inclusion across income groups, phases of the financial cycle, and policy regimes. Findings reveal that contractionary monetary policy and stricter macroprudential policy limit the extent of financial inclusion, both in isolation and jointly, through the bank lending channel. Strong institutional quality and regulations significantly moderate the effects of policy coordination on financial inclusion. From a policy perspective, the findings underscore the need for coordinated policy actions in EMDEs, with monetary and macroprudential measures carefully calibrated to avoid unintended constraints on financial access.