Abstract
In this study, we rely on the extension of the endogenous growth theory to consider the role of ICT diffusion in the finance–growth nexus theoretically informed via the supply-leading and demand-following theses. Motivated by current realities highlighting the significance of information and communication technologies (ICTs) to modern societies, the study evaluates the foregoing research objective in ECOWAS countries over the 2005–2016 period based on the justification of the ICT diffusion into the ECOWAS region around the early 2000s. Innovatively, the study constructs an ICT diffusion index covering fixed telephone lines, mobile cellular subscription and Internet penetration as relevant media for ICT dispersion. We adopt the pooled mean group estimator on a dynamic panel ARDL model for robust analysis of the subject matter. We find that financial development (its main and alternative measure) alone inhibits growth of ECOWAS countries, but its interaction with ICT diffusion promotes economic growth in the region. The implication of our research findings for the West African region is that financial sector development efforts have to be strengthened by investment in ICT infrastructure, improved Internet penetration and further integration of electronic finance policies.
Highlights
A considerably large number of theoretical and empirical studies have attempted to recognize the main drivers of economic growth, and the level of financial development has been identified as such
The results show that growth rate of gross domestic product (GR) does not have unit root, i.e. it is stationary at level [I(0)] at 1% significance level
Financial development (FIN), Information and communication technology (ICT) and the degree of openness (TOP) represent growth of gross domestic product, financial development measured by broad money supply as a ratio of GDP, information and communication technology index and degree of openness
Summary
A considerably large number of theoretical and empirical studies have attempted to recognize the main drivers of economic growth, and the level of financial development has been identified as such The endogenous growth theory, in conjunction with the McKinnon–Shaw hypothesis, stressed the importance of financial development for long-term economic growth through the effect of financial sector services on capital accumulation and technological innovation (see [2]). Such financial services include mobilizing deposits, gathering portfolio. Information and communication technology (ICT) is a variety of technical tools and resources used to communicate and to develop, disseminate, store and manage information (see [43]) It represents a collection of technologies and applications, enabling electronic processing, storing, retrieval and transfer of information to a wide variety of users [14]. It enables the exchange of data across multiple locations and aids decentralized information processing and contributes potentially to the emergence of new business and company cooperation models that rely on the spatial exchange of large batches of information, which boosts processes of competition and innovation
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