Affiliation:
1. University of Mauritius, Mauritius
Abstract
It is crucial to assess the impact of digital transformations on the financial sector given the rapid emergence of digitalisation. As such, the study aims at identifying the extent to which digitalization has impacted on financial sector development in a sample of small island developing states, over the period 2000 to 2020. Additionally, given the crucial importance of institutional quality in reducing banking sector risk, and therefore enhancing the level of development in the financial sector, the study investigates the nexus between digitisation and financial development through the moderating impact of institutional quality. The study adopts the PVECM framework to investigate the link. The results demonstrate digitalization is important to boost financial development and digitalization coupled with good quality institutions will further promote financial development. More so, FDI and trade openness are also determinants of financial development for the case of the small island economies considered in the present study.