Full Modified Ordinary Least Square Analysis of the Relationship between New Technologies of Information, Financial Development and Growth in WAEMU Zone

Abstract

This paper aims to study the relationship between financial development, information, and communication technology (ICTs) diffusion and economic growth by examining the effects of interactions between finance and ICT on economic growth. The study covers eight West African Economic and Monetary Union (WAEMU) countries and spans the period from 2000 to 2018. The empirical results, after applying the fully modified ordinary least squares (FMOLS) estimator can be generalized as follows. First, regardless of the financial development indicator used, the empirical results show that financial development negatively influences economic growth in the WAEMU. This counter-intuitive relationship may be related to many phenomena, but there are no clear explanations in the literature yet. Second, ICTs diffusion improves economic growth in the zone. This implies that WAEMU countries should strengthen their ICTs policies and improve the use of new information and communication technologies. Finally, the interaction between ICTs diffusion and financial development is positive and significant in explaining growth. This implies that the economies of the WAEMU region can only benefit from financial development once a level of ICTs development is reached.