Does digital payment induce economic growth in emerging economies? The mediating role of institutional quality, consumption expenditure, and bank credit

ABSTRACT

This paper analyzes the direct and interactive effect of digital payments through institutional quality, consumption expenditure, and bank credit on economic growth for 25-member countries of the Committee on Payments and Market Infrastructures (CPMI) for 2012–2020. Using the Fixed Effect with Driscoll-Kraay Panel Corrected Estimators, it finds that a rise in digital payments positively impacts economic growth. The interaction effect of digital payments with other variables does not promote economic growth. To address differences among the selected countries and to have a robust analysis, the paper classified the selected countries into quantiles based on the GDP per capita level using the Bootstrapped Panel-Quantile Regression (BPQR) method. The BPQR confirms the positive relationship among digital payments, institutional quality, and consumption expenditure with economic growth, whereas credit impacts it negatively. Control variables, such as inflation, exchange rate, health, and unemployment, behave as per economic theories related to economic growth.

KEYWORDS:

• Digital payment
• economic growth
• institutional quality
• consumption expenditure
• bank credit

Subject classification codes:

• G21
• O43
• E21
• E51

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This research is part of the project work funded under an institute initiation grant by IISER Bhopal for the First Author [grant number IISERB/R&D/2022-23/142].