Impact of fintech readiness, natural resources, and business freedom on economic growth in the CAREC region

Abstract

The CAREC region, particularly Central Asian economies, traditionally rely on mineral resources. However, there is an increasing awareness of the significant potential and growing interest in financial technology, and supportive business regulations. Hence, this study investigates the pivotal role of fintech, natural resources, and economic freedom in shaping the economic growth trajectory of the CAREC region between 2000 and 2020. So far, no publicly available fintech index exists for this region. This study constructed a comprehensive index considering digitalization and financial development to analyse fintech readiness. It applies fixed and random effect models to examine the relationships between these variables. To account for non-linearity stemming from structural shifts and global financial shocks, it employs method of moment quantile regression (MMQR). The findings from the fixed effect models substantiate the positive impact of fintech, economic freedom, and natural resources on economic growth, albeit with varying degrees of marginal influence. A one-percentage-point improvement in fintech, economic freedom, and natural resources yields economic growth boosts by 0.102%, 0.903%, and 0.176%, respectively. Parallel results emerge from the random effect models with differing magnitudes and parameter significance levels. The MMQR outcomes consistently highlight the potency of fintech and economic freedom, with their impact being more pronounced at higher and lower quantiles of economic growth, respectively. This suggests that countries in the CAREC region experiencing higher growth levels stand to gain more from Fintech adoption, while those with lower growth levels can reap greater benefits from enhanced economic freedom. This study sheds light on the multifaceted interplay of these factors, offering valuable insights for policymakers and stakeholders in the CAREC region.