The Growth Effects of Electronic Banking: Evidence from Eastern Africa
Innovations in the financial sector are theoretically imbued with the potential to impact economic growth. However, studies that have sought to investigate this linkage in Eastern Africa have produced mixed results. Moreover, barely a few existing empirics have attempted to examine the possible mediating role of investment and savings on the latter nexus if any. With a focus on the period from 2004 through 2018, this study investigates the extent to which electronic banking affects economic performance in the region. Furthermore, the moderating effects of investment on the one hand and savings on the other were examined in the innovations-growth nexus to capture any conditional effects. To achieve our objective, panel data was analyzed using the autoregressive distributed lag (ARDL) approach, well-known for its efficiency and unbiasedness, as it takes care of endogeneity and serial correlation but which is also relatively more robust in small and finite sample data size. The results reveal the presence of the short and long-run relationship between electronic banking and economic growth. It is important note here that the impact is significantly stronger for the long-run relative to the short-run. Interestingly, our findings confirmed the significant role played by the capital formation in the latter relationship. On the other hand, the analysis provides no evidence that gross domestic savings are important in this linkage. However, we observe a direct critical role of investment, savings, inflation, foreign direct investment as well as labor in influencing output growth in the long run. Policies that are geared towards promoting electronic banking and investment while simultaneously minimizing the risks to the financial sector instability should be a priority in Eastern Africa
Keywords: Financial Innovations; Economic Growth; Eastern Africa; Panel ARDL
Reference to this paper should be made as follows: Kyewaalabye, M., Mayanja, J. B., & Nnyanzi, J. B. (2022). The Growth Effects of Electronic Banking: Evidence from Eastern Africa. Journal of Entrepreneurship, Business and Economics, 10(1), 294–325.
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