Financial inclusion, the inflation tax, and consumption inequality in the Philippines
Date
2017
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
High inflation acts as a regressive consumption tax, significantly impacting the poor.
Including the poor in the formal financial system can help them weather the effects of high
inflation. Financial inclusion allows individuals to augment their nominal money balances by
saving and earning on deposits, as well as by taking out loans. Access to formal financial
services has the potential to increase the purchasing power of the poor and reduce the inequality
of consumption. This study uses panel regression analysis to determine the effects of financial
inclusion on the inequality of consumption through the inflation channel. The researchers find
that: (1) given low levels of financial inclusion, higher levels of inflation result in higher levels
of consumption inequality; (2) given high levels of financial inclusion, higher levels of inflation
result in lower levels of consumption inequality; (3) at all levels of inflation, financial inclusion
reduces consumption inequality; and (4) at higher levels of inflation, financial inclusion reduces
consumption inequality by a larger amount.
Description
Keywords
financial inclusion, inflation, consumption, inequality