ICT adoption, innovation and financial development in a digital world: empirical analysis from Africa

Abstract

As a response to a digital era that is seen as a core element of global digitalisation, financial development in many countries including those in the African continent experienced varying patterns. These have made some countries to be categorised as relatively high and others relatively low in terms of their scale on digital economy. Thus, this study empirically investigates the interaction of information and communication technology (ICT) adoption and innovation, and the role of this digitalisation interaction on financial development in Africa, and across the sub-regions. It utilises the Bayesian Vector Auto-Regressive (BVAR) modelling to simulate the impulse response function and variance decomposition across Africa. The study finds that ICT-innovation interaction shock positively drives financial development across all of 6 datasets. This implies that for multinational corporations (MNCs) and other economic agents, ICT – innovation interaction should be strongly applied across all sectors to drive financial development since all sectors require finances to improve performance. Thus, contributes to the empirical testing of the theoretical reflections of digitalisation and digital economy interaction in African countries.