Analysis of the Financial Model of the ICT Price Basket on Financial Development Indicators of GCC Countries

Abstract

This study aims to analyse the financial model of the information and communication technology (ICT) price basket to determine is effect on financial development indicators. This model measures cost as a percentage of gross national income per capita and the affordability of ICT services in Gulf Cooperation Council (GCC) countries for the period of 2008–2016. The results show that Saudi Arabia and Oman had high ICT price baskets, while the ICT price basket of Kuwait was low. This study applied panel-corrected standard errors, fixed effect, random effect and the generalized method of moments methods. The same results were confirmed in all tests, which showed a potentially negative relationship between ICT basket prices and financial development, as measured by domestic credit and market capitalization. The ICT basket price had a positive effect when financial development was measured by the stock market. The main conclusion is that decision-makers should adopt a long-term flexible strategy to improve the level of financial development indicators based on the ability of the GCC countries to afford ICT development.