RESEARCH ARTICLE Does Financial Inclusion Amplify Output Volatility in Emerging and Developing Economies? Tony Cavoli 1 & Sasidaran Gopalan 2 & Ramkishen S. Rajan 3 # Springer Science+Business Media, LLC, part of Springer Nature 2019 Abstract This paper empirically investigates if, in what direction, and under what circumstances financial inclusion amplifies or moderates output volatility, which is a matter of concern for monetary policymakers in emerging and developing economies (EMDEs). The empirical estimation for a large panel of over 100 EMDEs spanning the period 1995 to 2013 finds a strong and persistent trade-off between higher financial inclusion and output stability. The paper also finds strong and robust evidence of non-linearity governing this relationship. Countries with high degrees of financial inclusion as well as those that are relatively lower income tend to experience a significant trade-off between financial inclusion and output stability. Further, the paper also finds that reckless financial inclu- sion coinciding with excessive credit growth tends to worsen output volatility. Keywords Financial inclusion . output volatility . credit growth . emerging and developing economies . panel data JEL Classification E44 . E32 . O11 Open Economies Review https://doi.org/10.1007/s11079-019-09568-0 The authors appreciate the valuable feedback offered by an anonymous referee of the journal. They also sincerely thank Aizhan Sharipova for providing high-quality research assistance. The authors are also thankful for the financial support provided by the Lee Kwan Yew School of Public Policy, National University of Singapore under the “Special Project Funding Scheme. The usual disclaimer applies. * Tony Cavoli Tony.Cavoli@unisa.edu.au Sasidaran Gopalan sasi.gopalan@ntu.edu.sg Ramkishen S. Rajan spprsraj@nus.edu.sg 1 UniSA Business School, University of South Australia, Adelaide, Australia 2 Nanyang Business School, Nanyang Technological University (NTU), Singapore, Singapore 3 Lee Kuan Yew School of Public Policy, National University of Singapore, Singapore, Singapore