An investigation into the effects of financial inclusion on the monetary transmission mechanism in Turkey

The effects of globalization and technological advancements on the financial sector have led to significant transformations in the economic structures of countries, with some of the most profound reflections observed in the concept of financial inclusion. Financial inclusion, by ensuring affordable and reliable access to financial products and services for individuals and businesses, emerges as a key mechanism for promoting social justice and fostering sustainable economic growth. In the case of Türkiye, enhancing access to financial services—particularly for low-income groups—holds strategic importance in reducing economic vulnerabilities and strengthening macroeconomic resilience. The primary objective of this study is to examine the effects of financial inclusion on the monetary transmission mechanism in Türkiye, and thereby to understand the potential role of an inclusive financial system in enhancing the effectiveness of monetary policy. To this end, a Financial Inclusion Index (TFKE) was constructed at the provincial, regional, and national levels for the period between 2007 and 2024. The relationship between this index and key macroeconomic variables—such as inflation, exchange rate, interest rates, and housing prices—was analyzed using ARDL and FMOLS methods. The empirical findings indicate that financial inclusion enhances the effectiveness of monetary policy primarily by contributing to lower inflation. Improving financial inclusion not only helps address present-day economic challenges but also enables the construction of a more resilient economy against potential future structural risks. In this context, the role of financial inclusion in the functioning of the monetary transmission mechanism should not merely be considered an academic issue, but rather a strategic necessity for sustainable development and global welfare.