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AbstractThis article examines the relationship between Inflation targeting (IT) and financial instability from 1990 to 2015 for Asian economies. To measure financial instability, a multidimensional financial conditioning index is calculated following the ECB's approach. Using a fixed effects panel data model the study finds that adoption of IT policy in Asian economies has an adverse impact on financial stability, thus rejecting the 'conventional wisdom' hypothesis. Further, the Vector Autoregression (VAR) result shows that an IT regime increases housing returns and encourages investors to take higher risks.

Purpose
The purpose of this paper is to assess the dynamic impact of financial inclusion on economic growth for a large number of developed and developing countries.


Design/methodology/approach
This study uses some panel data models such as country-fixed effect, random effect and time fixed effect regressions, panel cointegration, and panel causality tests to examine the linkage between financial inclusion and economic growth. Panel cointegration is being used to test the long run association between financial inclusion and economic growth, whereas panel causality test is used to find the direction of causality between financial inclusion and economic growth. The data on financial inclusion are taken from Sarma (2012) for the period 2004-2010.


Findings
The empirical findings reveal that there is a positive and long run relationship between financial inclusion and economic growth across 31 countries in the world. Further, panel causality test shows a bi-directional causality between financial inclusion and economic growth Thus, the study confirms that financial inclusion is one of the main drivers of economic growth.


Research limitations/implications
This study has two limitations. First, this study considers only banking institutions in the analysis. Second, the period tested for the long run relationship is not long enough.


Practical implications
This study empirically measures the quantitative impact of financial inclusion policies pursued across the world. The study also suggests that policies emphasizing financial sector reforms in general and promoting financial inclusion in particular shall result in higher economic growth in the long run.


Originality/value
This study attempts to assess the long run relationship between financial inclusion and economic growth with the help of a multidimensional index of financial inclusion. Therefore, this can be a valuable contribution to the banks and policymakers.

PurposeThe purpose of this paper is to construct a robust macroeconomic performance (MEP) index of the State economies of an emerging market economy, i.e. India.Design/methodology/approachTwo variants of data envelopment analysis (DEA) models – radial and non‐radial – are proposed to construct the macroeconomic policy performance of 22 Indian State economies in the post‐economic reforms era covering the period: 1994‐1995 to 2001‐2002, using three macroeconomic indicators: growth in gross state domestic product, price stability, and fiscal deficit.FindingsThe authors' three broad empirical findings are: first, the radial and non‐radial DEA models yield significantly different rankings of State economies in terms of their MEP index scores; second, as against the use of only growth in gross state domestic product and price stability for MEP measure, the inclusion of fiscal deficit as an additional indicator yields a noticeable improvement not only in the State MEP index scores, but also in their rankings, thus providing the evidence of relatively successful attempt by the Indian States in reducing fiscal deficit, in general, and legislating FRBM bill, in particular; and third, a positive significant correlation between foreign direct investment (FDI) and MEP indicates that a State's overall macroeconomic policy performance does matter to attract FDI.Research limitations/implicationsSince the DEA models employed in this study ignore the possibility of asymmetric shocks, the MEP results might be questioned in this deterministic setting. However, the study period has been smooth and has not been subject to any major changes in the State economic policies. Therefore, the MEP results might not be susceptible such changes. However, further research is desired on examining the macroeconomic policy performance behavior of Indian States using bootstrapping DEA.Originality/valueNone of the past Indian studies were able to give a comprehensive picture concerning the MEP behavior of Indian State economies, since the methodologies adopted in those studies were not suitable to take into consideration all the macro indicators at a time. Therefore, this present study is considered the first of its kind in assessing the MEP index of the Indian State economies by simultaneously considering all the macro indicators.

This article examines the sectoral impact of disinflationary monetary policy by calculating the sacrifice ratios for several Organisation for Economic Co-operation and Development (OECD) and non-OECD countries. Sacrifice ratios calculated through the episode method reveal that disinflationary monetary policy has a differential impact across three sectors in both OECD and non-OECD countries. Of the three sectors, the industry and service sectors show significant output loss due to a tight monetary policy in OECD and non-OECD countries. But the agricultural sector shows a differential impact of disinflation policy: It shows a negative sacrifice ratio in OECD countries indicating that output growth is insignificantly affected by a tight monetary policy while non-OECD countries yield positive sacrifice ratios, suggesting that the output loss is significant. Further, it is observed that sacrifice ratios calculated from aggregate data are different from ratios calculated from sectoral data. JEL Classification: E52, E58, C14, O50