The effects of financial inclusion and internet banking on economic growth and household consumption in Turkey

The subject of financial inclusion is relatively a new phenomenon that has begun to addressed in the finance and economic development literature. While the economic development literature has a large corpus examining the effects of finance on growth, the subject of financial inclusion and its effects has a relatively recent history in the literature. Economists have had two different views on the effect of finance on economic growth. While some economists stated that finance is the servant of the economy and finance simply follows economic development, others claimed that finance is one of the determinants of economic growth. Today, it seems that a there is a general consensus been reached on the contribution of finance to economic growth and the direction of causality. Although different results are reached in studies conducted for different countries and for different periods, it is generally accepted by economists that finance contributes significantly and strongly to economic growth. The subject of financial inclusion and its impact on economic development does not have a long literature history yet. Studies conducted in this context have reached different results within the framework for different countries and different methods that used for analysis. On the other hand, increasing financial inclusion is desirable phenomena for all economies. Greater financial inclusion provides access to formal financial services, especially for poor and vulnerable segments of society. And the cost-effective use of financial services improves the quality of life of individuals, giving the poor the opportunity to carry out daily financial transactions, to make risk management, to save and to invest. Within the scope of the thesis, firstly, finance and economic growth relationship was examined within the scope of the literature. Then the relationship between financial inclusion, financial development and economic growth was discussed and selected country examples related to financial inclusion were examined. Later, the financial inclusion, digital banking and economic growth relationship was tested for Turkey with 3SLS model. Within this context, - An internet banking index has been developed, allowing different internet and mobile banking transactions to be monitored through a single index, - Internet banking has been included as a component of financial inclusion in financial inclusion index calculations. Within the scope of the thesis, it has been demonstrated that. - development in financial inclusion, increases economic growth for Turkey, - development in the internet banking usage increases economic growth for Turkey, - increase in both financial inclusion, internet banking and the number of ATMs positively affects household consumption, - growth in the financial sector directly contributes to economic growth via increasing the physical capital stock for the Turkish case.