The Impact of Financial Inclusion and Trade Openness on Economic Development in the European Union

Ruixian Huang, Seenaiah Kale, Sudharshan Reddy Paramati (Lead / Corresponding author), Farhad Taghizadeh-Hesary

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)peer-review


This study aims to investigate the impact of financial inclusion and trade openness on economic development in a sample of 27 European Union (EU) nations. Further, we classify our sample countries into low-income, high-income, old-EU, and new-EU members to provide more constructive policy and practical implications for the EU countries. To achieve these objectives, we utilize yearly data from 1995 to 2015 and panel econometric techniques. The results show that access, depth, efficiency, and overall development of financial institutions have a significant positive impact on economic growth in the full sample and subsamples. We also find that capital, labor, energy consumption, and trade openness also have an important role in driving the economic growth across these panels. It is important to highlight that the impact of financial inclusion on economic output is more significant in low-income and new-EU member countries than in high-income and old-EU member countries. Given the empirical findings, we provide detailed policy implications for the entire EU and for its subgroups.
Original languageEnglish
Title of host publicationEconomic Integration in Asia and Europe: Lessons and Policies
Subtitle of host publicationLessons and Policies
EditorsSang Chul Park, Chul-Ju Kim, Farhad Taghizadeh-Hesary, Pitchaya Sirivunnabood
Place of PublicationTokyo
PublisherAsian Development Bank Institute
Number of pages24
ISBN (Electronic)9784899742364
ISBN (Print)9784899742357
Publication statusPublished - Aug 2021


  • financial inclusion
  • economic development
  • trade openness
  • EU members
  • panel estimations


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