Nexus between digital financial inclusion and economic growth: a panel data investigation of Asian economies

Abstract

PurposeThis study aims to investigate the relationship between digital financial inclusion and economic growth in specific Asian countries, emphasizing the exploration of how digital financial inclusion dynamics impact gross domestic per capita income.Design/methodology/approachThe study creates a digital financial inclusion composite index (DFII) by incorporating essential metrics from the Global Findex report. Economic growth is measured using Gross Domestic Product per capita income in its natural logarithmic form (LnPCI), with three control variables– employment-to-population ratio; population growth and inflation. The analysis utilizes a fixed-effect dummy variable model to examine the relationship, considering unobserved country-specific heterogeneity. 30 Asian countries have been selected for the study for the periods 2014, 2017 and 2021 based on their availability, as outlined in Table 4.FindingsThe research revealed a robust positive correlation between the Digital Financial Inclusion Index (DFII) and logarithmic GDP per capita income (LnPCI), indicating higher per capita income with enhanced digital financial inclusion. Employment and population exhibited minimal influence, whereas inflation had a notable negative effect on per capita income. Population growth showed a limited impact. The model demonstrated a high explanatory power for the dependent variable (high R-squared), and the residuals displayed low autocorrelation (Durbin–Watson of 1.96).Originality/valueThis study adds to the existing literature by examining the intricate connection between digital financial inclusion (DFI) and economic growth in 30 Asian countries, employing a comprehensive composite index for analysis.