Effects of the interaction between financial development and information and communication technology on economic growth in the Arab region. We continue in the same momentum of empirical studies by examining the interaction between the financial system and ICT to check whether ICT diffusion strengthens the economic growth response to the fluctuations of the financial system in the Arab region. 2018 period.1 In addition to financial development and ICT indicators, we include investment, labor force and trade openness in the model to illuminate other driving forces through which the interaction between the financial system and ICT diffusion can affect economic growth.
Accordingly, following a more general model allows us to avoid biased estimates and thus accurately assess how economic growth responds to the interaction between financial development and ICT diffusion, providing important policy implications for decision makers in the Arab region. The obtained results indicate positive and significant responses of economic growth to the interaction between financial development and ICT diffusion. The study examines the interaction effects between financial development and ICT diffusion on economic growth by controlling for three auxiliary variables namely investment, labor and trade openness for a set of 15 Arab countries over the period 2001–2018 based on a dummy Uncorrelated Regression (SUR) approach under panel data models.
Literature review
The results show that telecommunications investment is a relevant driver of economic growth in the considered set of countries. The results reveal positive and significant correlations between ICT, financial development and economic growth in the long run. 2018) chooses the system GMM technique in the context of dynamic panel data models to study empirically how economic growth responds to the changes in ICT and financial system for a set of 43 developing economies (low-income and lower-middle-income countries) in the period 2000-2014.
2018) opt for the system GMM technique in the context of dynamic panel data models to empirically study how economic growth responds to the changes in ICT and financial system for a set of 43 developing economies (low-income countries and lower middle-income countries) over the 2000-2014 period. 2018) examine the effects of ICT on economic growth in the G20 economies over the 2001-2012 period using panel data testing and estimation procedures. The results suggest that financial development hinders economic growth in the ECOWAS region, but its interaction with ICT promotes growth.
Model and estimation issues
2015) apply the panel's general least squares method to estimate the Cobb-Douglas production function to measure the effects of labour, ICT capital services and non-ICT capital services on economic growth in European countries over the period 1994-2000 and 2001 -2008 to assess changes in the development of ICT capital. The results indicate that slower non-ICT capital growth and stagnating ICT capital growth are causing a decline in economic growth. 2015) opt for Granger causality in the context of panel vector autoregressive models to study the relationship between ICT, financial development and economic growth for a range of 21 Asian economies over the period 2001-2012.
The results show evidence of short-term and long-term causal relationships between ICT, financial development and economic growth. They also reveal that the ICT financing aggregate impact on economic growth is positive in low-income economies, but insignificant in lower-middle-income economies. The results show evidence of no significant differences in the responses of output growth to ICT penetration across developing, emerging and developed economies.
Ahmed and Adediran (2020) assess the role of ICT in the finance-growth nexus in the ECOWAS (Economic Community of West African States) region over the 2005-2016 period by opting for the pooled mean group estimator in the context of dynamic panel autoregressive -distributed lag models. Ahmed and Adediran (2020) assess the role of ICT in the finance-growth nexus in the ECOWAS (Economic Community of West African States) region over the 2005-2016 period by opting for the pooled mean group estimator in the context of dynamic panel autoregressive -distributed lag models. We assess the responses of economic growth to the interaction between financial development and ICT diffusion by controlling for three relevant drivers in the model.
˙ฃܫܸܰ௧+ ˙ಹܮܨ௧+ ˙ܱܶ௧+ ௧ (1) where the cross-sectional index i refers to the country, the time dimension index t refers to the time period of each country, ௩ is the growth rate of the real gross domestic product (constant 2010 US$) , ܨܦ௧ is the financial development index,2 ܫܥܶ௧ is the ICT indicator,3 ܨܫܥܶ௧ is the interaction between financial development and ICT. The results reveal that people's living standards are largely caused by headphone lines and mobile telephony, whereas internet use is not a significant driver of economic growth. Sassi and Goaied (2013) empirically assess the joint effect of ICT and financial system on economic growth in MENA economies by estimating a dynamic panel data model using the system GMM procedure.
6 The sample period is long enough to assess the relationship between economic growth and the interaction between financial development and ICT diffusion in the panel data framework.
Analysis of the results
Descriptive analysis
2 We consider the financial development index determined by the International Monetary Fund to provide a relative ranking of countries in the depth, accessibility and efficiency of their financial markets and financial institutions. Data for the financial development index were collected from the International Monetary Fund database, while data for all other variables were collected from the World Development Indicators database published by the World Bank. 5 Evolutions of time-varying patterns of growth rate, financial development index and ICT indicators in all countries are reported in Figures 1-4.
We first report the results of the estimation of two versions of the model given by Eq. 1) without the interaction between financial development and ICT diffusion (ଷ = 0). We secondly report the results of the estimation of two versions of the model given by Eq. Indeed, the interaction between financial development and ICT diffusion is proxyed in the third model by ܨܫܥܶ௧ = ܨܦ௧× ܫܰܶ௧, and in the fourth model by ܨܫܥܶ௧ = ܨܦ௧×.
The summary statistics reported in Table 1 show that the UAE experiences the highest average internet usage and mobile subscriptions (63.24 and 133.13) followed by Bahrain (55.59 and 118.32), which may be due to the high ICT penetration in Gulf Cooperation Council countries (GCC). Niebel (2018) examines the ICT-growth nexus for a sample of 59 economies over the period 1995-2010 based on panel data regression. In addition, six out of fifteen countries experience a relatively high level of financial development, the average of which exceeds 0.40.
The country-by-country values of the empirical correlations presented in Table 2 show that for eight out of fifteen countries, growth rate is negatively related to financial development. Furthermore, growth rate is negatively related to the interaction between financial development and ICT diffusion for almost all Arab economies. For the full set of countries, growth rate is positively and weakly related to financial development and negatively and weakly related to ICT diffusion and the interaction between financial development and ICT.
This knowledge is not conclusive about the responses of economic growth to the interaction between financial development and ICT diffusion, thus leading us to do an in-depth analysis of the relationship between these variables based on the above model and estimation issues for achieve the required objectives. .
Effects of financial development and ICT diffusion on economic
18, allows the use of the SUR procedures to assess the responses of economic growth to the interaction between financial development and ICT diffusion by controlling for auxiliary variables in the models. When considering the interaction between financial development and ICT diffusion, the estimation results of models 3 and 4 show that the impact of ICT diffusion on economic growth is still statistically significant, but it becomes negative. However, the joint effect of financial development and ICT diffusion on economic growth is statistically significant and positive, suggesting that ICT diffusion positively affects economic growth through financial development.8 Indeed, an increase of one unit in the interaction between financial development and the Internet use leads to an increase of 0.024 unit in economic growth, while an increase of one unit in the interaction between financial development and mobile subscriptions leads to an increase of 0.014 unit in economic growth.
Indeed, the positive effects of the interaction between financial development and ICT diffusion on economic growth can be supported by the development of the financial sector and ICT in many Arab countries due to the regulations implemented in these countries. The study examines the empirical evidence of the relationship between economic growth and the interaction between financial development and ICT diffusion as well as three drivers of economic activity, namely investment, labor force and trade openness for a panel of 15 Arab economies over the 2001 -2018 -period by opting for the SUR procedure in the framework of panel data models. The findings are in line with expectations and show that economic growth responds positively to the interaction between financial development and ICT diffusion, a finding that can be explained by the development of the financial sector and the adoption of digital transformation in many Arab countries.
The responses of economic growth to the interaction between financial development and ICT penetration differ per ICT proxy. Overall, strengthening the interplay between financial development and ICT diffusion through these actions could play an important role in achieving inclusive and sustainable economic growth. where the effect of internet use is greater than the effect of mobile subscriptions. Overall, strengthening the interplay between financial development and ICT diffusion through these actions could play an important role in achieving inclusive and sustainable economic growth.
ICT Diffusion, Financial Development and Economic Growth: New Evidence from Low and Lower Middle Income Countries. Information communication technology (ICT) infrastructure and economic growth: a causality evidenced by country-wide panel data. The Effects of Internet Use, Financial Development and Trade Openness on Economic Growth in South Africa: A Time Series Analysis.
Information and Communication Technology (ICT) Infrastructure and Economic Growth: Causality Evidence from Cross-Country Panel Data. The Effects of Internet Use, Financial Development and Trade Openness on Economic Growth in South Africa: A Time Series Analysis. Development of economic growth in the period 2001-2018 Notes: Model 1 includes financial development and Internet users as a percentage of the population and control variables; Model 2 includes financial development and mobile phone subscriptions (per 100 people) and control variables; Model 3 includes financial development, Internet users as a percentage of the population, and the interaction between financial development and ICT diffusion, as well as control variables; Model 4, on the other hand, includes financial development, mobile phone subscriptions (per 100 people), and the interaction between financial development and ICT diffusion, as well as control variables.
