Exploring the link between financial inclusion and food security in Algeria: A VECM approach

Abstract

This study explores the link between financial inclusion and food security in Algeria from 2003 to 2022. Using a composite financial  inclusion index and the Vector Error Correction Model (VECM), we analyse the data, subjecting it to various diagnostic tests. Surprisingly,  our results reveal that financial inclusion (FI) has a significant and positive impact on undernourishment prevalence, indicating a negative  effect on food security in both the short and long term. Likewise, food imports (FIM) contribute to higher undernourishment  prevalence, implying a weakening of food security in the long-run. Conversely, unemployment rate (UEM) and food production (FOP)  show no substantial long-term impact on food security, although UEM has an opposing effect in the short run, meaning it improves food  security at the short term; which can be attributed to the informal economy and other State’s policies. Notably, income per capita  (INCAPITA) negatively affects undernourishment prevalence, improving food security. These findings offer a nuanced understanding of  the complex relationship between financial inclusion and food security in Algeria, emphasizing the need for multifaceted, contextspecific  policies to address the country's unique challenges.