of financial inclusion. The variables are selected on the basis of past research<sup>4</sup> and available country coverage.

For individuals, the provision of credit is measured using the indicators “has a credit card” and “borrowed in past 12 months from a financial institution” from the Global Findex. Both indicators capture formal borrowing. Savings are quantified using the variable “adults saving at a financial institution in the past year”. Account ownership is captured using the variable “account at a financial institution”. Insurance is measured with the variable “purchased agriculture insurance”. As a robustness measure for insurance, we also use data from the International Monetary Fund’s Financial Access Survey (FAS)<sup>5</sup> and include “life insurance policy holders” and “non-life insurance policy holders”. Payments is accounted for by the indicator “has a debit card” and a combined measure computed using information on the two waves of Global Findex to compute an indicator for the usage of the Internet or other electronic means to make payments.

Financial inclusion of firms is measured using information from the Enterprise Survey and Global Findex. The use of credit is captured through “percent of firms with a checking or savings account” and “percent of firms using banks to finance investments”. Savings for business purposes are captured by the variable “saved in past 12 months: for farm/business purposes”. Account ownership is measured using the “percentage of firms with a checking or savings account”. Payments are quantified with the variable “used an account at a financial institution for business purposes”.

Figure 2 reports the distribution of the indicators employed in the analysis, arranged by country income-group. It also highlights the median, the minimum and the maximum of the distribution by income group.

The distributions of the financial inclusion indicators show that credit cards, account ownership, debit card, and electronic payments are used more in high income countries. For these indicators, the median value for high income countries is higher or very close to the maximum value for upper middle income countries and significantly higher than the remaining groups. Firm financing by banks appears to be the highest in some upper middle income countries, probably denoting a financial development pattern where capital markets complement banks for firm financing in the most financially developed countries (De la Torre et al., 2013). Data on agricultural insurance is available only for less developed countries.

# **_3.2 Financial stability: Measures_**

To measure financial stability along the three dimensions discussed earlier—financial resilience, volatility and crisis outcomes—we retrieve data from the World Bank’s Global Financial Development Database (GFDD),<sup>6</sup> the IMF’s FAS, and Laeven and Valencia (2013). We choose a parsimonious set of indicators that consistently measure our definition of financial stability. Our selection of the variables

> 4 See for instance Beck et al. (2008), Čihák et al. (2012), and the World Development Report 2014 (2013).

> 5 <u>http://fas.imf.org/Default.aspx.</u>

> 6 <u>http://data.worldbank.org/data-catalog/global-financial-development.</u>

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