Financial inclusion and central banks

David Bholat, Julia Kowalski and Simon Milward.

Financial inclusion means every adult having access to fair and affordable savings, transactional banking, credit and insurance. It also requires consumers of financial services to be literate around their use. Whilst this sounds unobjectionably positive, expanding access to financial products can create new risks for financial institutions, financial stability and the financially excluded themselves. Policymakers around the world are grappling with how to balance financial stability with the broader goal of financial inclusion, and have responded in different ways. We believe central banks both in developed and developing countries can play a valuable role in promoting financial inclusion and that they need to consider financial inclusion if they are to promote the good of all the people they serve.

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Inequality: reframing the debate, reforming institutions and rooting out rent-seeking

Marilyne Tolle.

Inequality sits near the top of Western politicians’ agendas and exercises the minds of academic economists and policymakers alike. While attention to the living standards of the poorest is warranted, I argue that the current focus on inequality is misplaced for two reasons: first, because inequality of outcome is of second-order economic importance compared to improving absolute living standards; and second, because it shifts attention away from tackling the inefficiencies caused by rent-seeking. Addressing these via institutional reforms would foster growth, raise the living standards of the poorest, and, as a by-product, reduce inequality.

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