Thesis Public Defense | VNP26 - Võ Thị Minh Tuyết

Impact of pandemic on financial inclusion: Throw caution to the win?

Student: Võ Thị Minh Tuyết, VNP-26

Supervisor: Dr. Lê Văn Chơn

Abstract:

 This study aims to investigate the causal impact of pandemic on financial inclusion by using a wide range of textual base indexes and pandemic event studies. Using the dataset of 38 countries from 2000 to 2020, we report the novel evidence that financial inclusion declined
considerably in response to the pandemic outbreak. Noticeably, an increase in one percentage of pandemic shock can lead to a 0.15%  decrease in financial inclusion. Furthermore, we include the number of factors characterizing what drives the change in financial inclusion that can moderate the adverse effect of infectious disease. We first obtain the evidence policy uncertainty can widen the detrimental effect of infectious disease on financial inclusion, and its interaction is significantly varied at different levels of policy uncertainty. Regarding the
moderation from heterogeneous factors, we found that the country with good bank performance and the lessen of lending constraint will have more chance to reduce the unfavorable impact of infectious disease on their inclusiveness of financial service. We also figure out that the government’s pandemic policy response significantly reduces the pandemic outbreak’s adverse effect. Particularly, the mandatory vaccine policy and the investment in healthcare services positively interact with the pandemic outbreak, which increases financial inclusion. Lastly,
although we confirm the significant positive treatment effect between efficiency in debt restructuring and pandemic event, the result of the pre-treatment effect does not satisfy the primary condition of counterfactual comparison. This result is sadly important because we
fairly reject any future study if they apply the simple interaction effects of efficiency in debt restructuring and the pandemic without considering the nature of the “staggered adaption” and “rollout design” of the pandemic event.

JEL Classification: G38; I15

Keywords: Pandemic, policy uncertainty, financial inclusion, bank lending, policy response, efficiency in debt restructuring