RETHINKING ICT AND FINANCIAL DEVELOPMENT: DOES DIGITALIZATION DIRECTLY HINDER ECONOMIC GROWTH?

Tam Phan Huy, Vy Tran Thi Thuy, Phuong Nguyen Thi Thu, Bang Nguyen Thi Tuyet, Han Tran Song and Tien Vo Quoc
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Tam Phan Huy: University of Economics and Law and Vietnam National University, Vietnam
Vy Tran Thi Thuy: University of Economics and Law and Vietnam National University, Vietnam
Phuong Nguyen Thi Thu: University of Economics and Law and Vietnam National University, Vietnam
Bang Nguyen Thi Tuyet: University of Economics and Law and Vietnam National University, Vietnam
Han Tran Song: University of Economics and Law and Vietnam National University, Vietnam
Tien Vo Quoc: University of Economics and Law and Vietnam National University, Vietnam

Journal of Economic Development, 2026, vol. 51, issue 3, 135-153

Abstract: This study examines the relationship between information and communication technology adoption, financial development, and economic growth, emphasizing the moderating role of credit availability. Using panel data for 180 countries from 2000 to 2022, comprising 2,590 observations from the World Bank, the study applies System GMM estimation to address potential endogeneity. The results show significant negative associations between information and communication technology adoption, credit expansion, and GDP growth. The interaction between technology adoption and credit availability is also negative, indicating that greater digitalization combined with financial deepening does not necessarily correspond to stronger economic growth. These findings are consistent with the Too Much Finance Hypothesis and suggest that rapid credit expansion and digital financial development may coincide with financial distortions. The study highlights the importance of financial governance, regulatory oversight, and institutional quality in supporting sustainable economic development.

Keywords: ICT Adoption; Financial Development; Economic Growth; Credit Expansion; Banking Efficiency (search for similar items in EconPapers)
JEL-codes: E44 G21 O33 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jecdev:023663

DOI: 10.35866/caujed.2026.51.3.006

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