The Role of Information and Communication Technologies on Financial Development and Economic Growth: PLS-SEM Approach

Abstract

The purpose of this paper is to explore the role of ICT diffusion on financial development (FD) and economic growth (EG) by using the PLS-SEM method. The sample size consists of data from 158 countries for the 2015-2020 time period. Test results indicate that ICT diffusion has positive and substantial direct effects on both FD and EG. A one-unit increase could lead to a 0.836 unit increase in FD and a 0.437 unit increase in EG. Test results show that Internet and telephone usage have a similar substantial effect on FD, while Internet usage has a greater effect on EG than telephone usage, as a one-unit increase in Internet usage could cause an increase of 0.509 units in EG, but a one-unit increase in telephone usage could cause an increase of 0.200 units in EG. Lastly, the findings of this paper support the causality running from FD to EG and the moderating role of FD between ICT constructs and EG. Thereby, the novelty of this study is that it examines the relationship between ICT diffusion (in addition to Internet and telephone use), FD, and EG concurrently using the PLS-SEM method in a large data set and finds robust empirical results supporting the theory.

Keywords

• ICT
• Internet usage
• telephone usage
• financial development
• economic growth
• PLS-SEM.

Bilgi ve Iletişim Teknolojilerinin Finansal Gelişmişlik ve Ekonomik Büyüme Üzerindeki Rolü: PLS-SEM Yöntemi

Abstract

Bu çalışma, PLS-SEM yöntemini kullanarak Bilgi İşlem Teknolojileri (BİT) yayılımının finansal gelişme (FG) ve ekonomik büyüme (EB) üzerindeki rolünü araştırmaktadır. Örneklem büyüklüğü 2015-2020 dönemi için 158 ülkeden elde edilen verilerden oluşmaktadır. Test sonuçları, BİT yayılımının hem FG hem de EB üzerinde olumlu ve önemli doğrudan etkileri olduğunu göstermektedir. BİT’deki bir birimlik artış, FG'de 0,836 birim ve EB'de 0,437 birim artışa neden olabilmektedir. Test sonuçları, internet ve telefon kullanımının FG üzerinde benzer önemli bir etkiye sahip olduğunu ancak internet kullanımının EB üzerinde telefon kullanımına göre daha büyük bir etkiye sahip olduğunu göstermektedir. Ayrıca, internet kullanımındaki bir birimlik artış EB'de 0,509 birimlik bir artışa neden olabilirken telefon kullanımındaki birimlik artış ise EB'de 0.200 birimlik bir artışa neden olabilmektedir. Son olarak, bu makalenin bulguları, FG’nin EB üzerinde olumlu ve istatistiksel olarak önemli doğrudan etkisi olduğunu ve ayrıca FG’nin BİT ve EB arasında olumlu ve önemli dolaylı etkisi olduğunu desteklemektedir. Sonuç olarak bu çalışma Bilgi İşlem Teknolojilerinin yayılımı, FG ve EB arasındaki ilişkiyi, geniş bir veri setinde, PLS-SEM methodunu kullanarak eş zamanlı olarak test etmekte ve teoriyi destekleyecek güçlü ampirik sonuçlar bularak literatüre katkı sağlamaktadır.

Keywords

• BİT
• internet kullanımı
• telefon kullanımı
• finansal gelişmişlik
• ekonomik büyüklük
• PLS-SEM

References

1. Akerman, A., Leuven, E. and Mogstad, M. (2022). Information frictions, internet and the relationship between distance and trade. American Economic Journal: Applied Economics, 14(1), 133-163. doi:10.1257/app.20190589
2. Andrianaivo, M. and Kpodar, K. (2011). ICT, Financial Inclusion, and Growth: Evidence from African Countries. IMF Working Paper, WP/11/73. Retrieved from https://www.imf.org/external/pubs/ft/wp/2011/wp1173.pdf
3. Authority Türkiye Electronic Communications. (2022). Türkiye Electronic Communications Industry, Quarterly Market Data Report. https://www.btk.gov.tr/uploads/pages/pazar-verileri/2022-3-k-disi-3ocak-63f71da4999a3.pdf
4. Aziz, T., Khan, G.U., Islam, T. and Pradhan, M.A.H. (2022). An analysis on the relationship between ICT, financial development and economic growth: Evidence from Asian developing countries. The Journal of International Trade & Economic Development. doi.org/10.1080/09638199.2022.2134912
5. Cheng, C-Y., Chien, M-S. and Lee, C-C. (2021). ICT diffusion, financial development, and economic growth: An international cross-country analysis. Economic Modelling, 662-671. doi.org/10.1016/j.econmod.2020.02.008
6. Chien, M.S., Cheng, C.Y. and Kurniawati, M.A. (2020). The non-linear relationship between ICT diffusion and financial development. Telecommunications Policy, 44(9). http://www.sciencedirect.com/science/article/pii/S0308596120301154
7. Chin, W.W. (1998). The partial least squares approach to structural equation modeling. In: G. A. Marcoulides (Ed.), Modern Methods for Business Research, 295–358. Mahwah, NJ: Lawrence Erlbaum Associates.
8. Cohen, J. (1988). Statistical power analysis for the behavioral sciences (2nd ed.). Hillsdale, NJ: Lawrence Erlbaum Associates.

9. Das, A., Chowdhury, M. and Seaborn, S. (2018). ICT diffusion, financial development and economic growth: new evidence from low and lower middle-income countries. Journal of the Knowledge Economy, 9, 928–947. doi.org/10.1007/s13132-016-0383-7
10. Daud, S.N.M. and Ahmad, A.H. (2022). Financial inclusion, economic growth and the role of digital technology. Finance Research Letters. doi.org/10.1016/j.frl.2022.103602
11. Fernández-Portillo, A., Almodóvar-González, M. and Hernández-Mogollón, R. (2020). Impact of ICT development on economic growth. A study of OECD European Union countries. Technology in Society, 63, doi.org/10.1016/j.techsoc.2020.101420
12. Hair, J. F., Hollingsworth, C. L., Randolph, A. B., and Chong, A. Y. L. (2017). An updated and expanded assessment of PLS-SEM in information systems research. Industrial Management & Data Systems, 117(3), 442–458, https://doi.org/10.1108/IMDS-04-2016-0130.
13. Hair, J.F., Hult, G.T.M., Ringle, C.M., Sarstedt, M., Danks, N.P. and Ray, S. (2021). Partial Least Squares Structural Equation Modeling (PLS-SEM) Using R. Switzerland: Springer.
14. Hair, J. F., Hult, G. T. M., Ringle, C. M., and Sarstedt, M. (2022). A Primer on Partial Least Squares Structural Equation Modeling (PLS-SEM). 3rd Ed. Thousand Oaks, CA: Sage.
15. Jöreskog, K. G., and Wold, H. (1982). The ML and PLS techniques for modeling with latent variables: Historical and comparative aspects. In H. Wold and K. G. Jöreskog (Eds.), Systems under indirect observation, part I (pp. 263–270). Amsterdam: North-Holland.
16. International Monetary Fund. (2023). Financial Development Index Database. Retrieved from https://data.imf.org/?sk=F8032E80-B36C-43B1-AC26-493C5B1CD33B
17. International Telecommunication Union. (2023a). Statistics-Indivicuals Using Internet. Retrieved from https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx.
18. International Telecommunication Union. (2023b). Digital Development Dashboard, an overview of the state of digital development around the world based on ITU data. Retrieved from https://www.itu.int/en/ITU-D/Statistics/Dashboards/Pages/Digital-Development.aspx
19. Lechman, E., and Marszk, A. (2015). ICT technologies and financial innovations: The case of exchange traded funds in Brazil, Japan, Mexico, South Korea and the United States. Technological Forecasting and Social Change, 99 (10), 355-376. https://doi.org/10.1016/j.techfore.2015.01.006
20. Mashadihasanli, T., and Zülfikar, H. (2023). The Impact of Information and Communication Technologies on Economic Growth: The Case of Selected European Countries. Journal of Research in Economics, 7(2), 131-150. DOI: http://dx.doi.org/10.29228/JORE.28
21. Nguyen, C.P., Su, T.D. and Doytch, N. (2020). The drivers of financial development: Global evidence from internet and mobile usage. Information Economics and Policy, 53, doi.org/10.1016/j.infoecopol.2020.100892
22. Pradhan, R.P., Arvin, M., Nair, M. Bennett, S., and Bahmani, S. (2017). ICT-finance-growth nexus: Empirical evidence from the Next-11 countries. Cuadernos de Economía, 40(113), 115-134, doi.org/10.1016/j.cesjef.2016.02.003
23. Sassi, S. and Goaied, M. (2013). Financial development, ICT diffusion and economic growth: Lessons from MENA region. Telecommunications Policy, 37, 252-261. doi.org/10.1016/j.telpol.2012.12.004
24. Svirydzenka, K. (2016). Introducing a New Broad-based Index of Financial Development (IMF WP/16/5). Washington DC.: IMF.
25. The World Bank Databank. (2023a). ICT goods exports (% of total goods exports). Retrieved from https://data.worldbank.org/indicator/TX.VAL.ICTG.ZS.UN
26. The World Bank Databank. (2023b). GDP per capita (current US$). Retried from https://data.worldbank.org/indicator/NY.GDP.PCAP.CD
27. Verma, A., Dandgawhal, P.S. and Giri, A.K. (2023), Impact of ICT diffusion and financial development on economic growth in developing countries. Journal of Economics, Finance and Administrative Science, Vol. 28 No. 55, 27-43. https://doi.org/10.1108/JEFAS-09-2021-0185
28. Wu, B. and Wang, Y. (2023). Does information communication promote financial development? Empirical evidence from China. Borsa İstanbul Review, 23(1), 136-148. https://www.sciencedirect.com/science/article/pii/S2214845022000783