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Published on: November 12, 2020
ICT diffusion and financial development: Comparing high, middle, and low-income countries.
Ying Li1, XiaoGuang Li1, Haseeb Ahmad2
1The Tourism College of Changchun University, Changchun City, Jilin Province, China.
Information and communication technology (ICT) diffusion positively impacts financial development in high-income nations but negatively affects middle and low-income economies. Policymakers should leverage ICT for financial sector growth.
Area of Science:
- Economics
- Information and Communication Technology (ICT)
- Financial Development
Background:
- The financial sector's development is increasingly linked to Information and Communication Technology (ICT) diffusion.
- Understanding the transmission channels between ICT and financial development is crucial for economic policy.
- Existing research may not fully capture the nuanced relationship across different income economies.
Purpose of the Study:
- To analyze the transmission channels between ICT diffusion and financial development.
- To compare the impact of ICT on financial development in high-income versus middle and low-income economies.
- To provide evidence-based recommendations for policymakers.
Main Methods:
- Utilized data from 2001-2019 for high-income and middle/low-income economies.
- Employed ICT indicators: ICT index, internet users, and mobile subscribers.
- Used financial indicators: financial development, institution, and market indices.
- Applied Generalized Method of Moments (GMM) for empirical analysis.
Main Results:
- ICT diffusion demonstrates a positive impact on financial development in high-income economies.
- Conversely, ICT diffusion shows a negative impact on financial development in middle and low-income economies.
- The study highlights divergent effects of ICT adoption based on national income levels.
Conclusions:
- Middle- and low-income economies should emulate high-income economies' strategies for integrating ICT in finance.
- Increased investment and policy focus on ICT within the financial sector are recommended for developing economies.
- Tailoring ICT strategies to national economic context is essential for maximizing financial sector benefits.
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