The nexus between financial inclusion and economic development: Comparison of old and new EU member countries

The main objective of this study is to investigate the impact of financial inclusion and trade openness on the economic development of 27 European Union (EU) nations. The sample countries are classified into low-income, high-income, old-EU, and new-EU members; this distinction allows us to provide more constructive and practical policy implications. Yearly data from 1995 to 2015 and panel econometric techniques were used. The results show that access, depth, efficiency, and the overall development of financial institutions have significant positive impact on economic growth in both the full sample and sub-samples. We also find that capital, labour, energy consumption and trade openness play an important role in driving economic growth across these panels. Moreover, 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 countries. Based on these findings, detail policy implications for the entire EU, as well as for its sub-groups, are provided.