The Synergistic Effects of Digitalization and Financial Capital on Inclusive Growth: Evidence from Sub-Saharan Africa - A Panel PMG-VECM Analysis

Mohamed Mabrouki

MPRA Paper from University Library of Munich, Germany

Abstract: This study examines the synergistic effects of digitalization and financial development on inclusive growth in Sub-Saharan Africa. Using a balanced panel from 13 countries (2000–2022) and the Pooled Mean Group Vector Error Correction Model (PMG-VECM), we establish a robust long-run equilibrium. Findings reveal digitalization (Internet penetration) and institutional quality as the strongest drivers, with elasticities of 0.084 and 0.424, respectively. Financial development shows a moderate positive effect (0.075), while investment and trade openness present counterintuitive negative coefficients, suggesting structural inefficiencies. A significant error correction mechanism confirms convergence towards long-run equilibrium at a 19.5% annual speed. As the first comprehensive application of PMG-VECM to this nexus in SSA, this study provides methodologically robust evidence that distinguishes short-run dynamics from long-run effects. The results underscore the necessity for integrated, long-term policies that simultaneously advance digital infrastructure, financial sector deepening, and institutional quality to foster inclusive growth.

Keywords: 1.; Digital; Transformation; 2.; Financial; Development; 3.; Inclusive; Growth; 4.; PMG-VECM; 5.; Sub-Saharan; Africa; 6.; Institutional; Quality; 7.; Panel; Cointegration (search for similar items in EconPapers)
JEL-codes: O55 (search for similar items in EconPapers)
Date: 2025-03-01
New Economics Papers: this item is included in nep-afr, nep-fdg and nep-mac
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