Abstract
PurposeThis study aimed to explore the effect of Financial Innovation (FI) on economic growth in Ghana, with a dataset spanning 1960–2019, adopting a broader conceptualization of FI as the ratio of broad money to narrow money.Design/methodology/approachThe study employs a non-linear autoregressive distributed lag (ARDL) time series econometric model to estimate data from the World Bank (1960–2019).FindingsThere is no evidence that FI significantly impacts economic growth. This could be due to the early and strict regulation of the financial technology (FIN-TECH) sector and the general inconclusiveness of the impact of financial development on economic growth.Practical implicationsPolicymakers must empirically explore the impact of early and strict regulation on the transformational impact of FI.Originality/valueThe paper is among the first to apply a broader conceptualization of FI in estimating the impact of FI on economic growth.
Highlights
This study is motivated by the lack of consensus about the impact of Financial Innovation (FI) on major welfare indices such as economic growth (GDP)
This study explored the effect of FI on economic development in Ghana, with a comparatively broader conceptualization of FI, to reflect the country reality that a significant proportion of FI occurs outside the financial industry
There is no evidence that FI advances, retards, or negatively impacts GDP significantly using the Ghanaian dataset
Summary
This study is motivated by the lack of consensus about the impact of Financial Innovation (FI) on major welfare indices such as economic growth (GDP). Regulators may gain useful insights into the effects of FI (especially from non-bank finance and FINTECH) on monetary policy transmission and modify regulations in tandem. International readers will improve their understanding of the levers and triggers of economic growth as well as the impact and evolution of regulation within the financial sector. This is even more vital considering that the traditional and nontraditional financial intermediary process is dominated by foreign-owned entities
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