Economic growth through digitalization in Africa: does financial sector development play a mediating role?

Abstract

PurposeThis paper aims to analyse economic growth in Africa focussing on the role of digitalization and financial sector development.Design/methodology/approachThe authors employ country-level data from 36 African countries over the period 2000–2020 and used fixed effect, random effect and the Hausman–Taylor estimation techniques.FindingsThe study, first finds that, digitalization propels financial sector development in Africa. Building on this, the study further finds that, digitalization conditioned on financial sector development at best does not promote economic growth in Africa. However, results of the net effects suggest that digitalization, overall, improve economic growth in Africa.Social implicationsIn the current environment of a sluggish global economy, digitalization can play an important role in assisting policymakers to spur economic growth. This has attracted the attention of many researchers in the developed world. However, little is done about the subject matter in Africa.Originality/valueThe findings of this paper are novel in the African sub-region with important policy implications.