Financial inclusion, being considered as a key enabler to reducing poverty and boosting prosperity
in emerging and frontier markets such as Vietnam, is the process in which individuals and small
businesses are provided with an access to useful and affordable financial products and services.
The extant literature on the empirical evidence regarding the contribution of financial inclusion to
macroeconomic stability is mixed. This paper investigates the linkages between financial inclusion
and macroeconomic stability, which has not yet been thoroughly examined in the literature, for 22
emerging and frontier economies from 2008 to 2015, with particular focus on a potential optimal
level. Using the panel threshold estimation technique, the empirical findings show that financial
inclusion, as approximated by the growth rate in the number of bank branches over 100,000
account holders, is found to enhance financial stability under a certain threshold. Financial
inclusion is also found to be of benefit to maintaining stable inflation and output growth. Policy
implications are also discussed on the basis of the important empirical findings