The impact of digital financial innovation on increasing financial deepening and growth in the banking industry

Document Type : Original Article

Authors

1 Department of Finance (Financial Engineering), University of Tehran, Tehran, Iran;.

2 Department of Finance (Financial Engineering), Faculty of Accounting and Management, Ilam Branch, Islamic Azad University, Ilam, Iran.

Abstract
Purpose: The aim of this research is to examine the impact of digital financial innovation on financial deepening and economic growth in the country.
Methodology: This study uses the Autoregressive Distributed Lag model (ARDL), which is preferable to other time series methods because it allows the application of joint integration tests with time series with different integration orders and is flexible with respect to sample size, including small and limited ones.
Findings: The main findings of this study are as follows: 1) evidence and reasons for the existence of a positive relationship between digital financial innovation and financial deepening are observed, of course, with the strongest and most intense effect originating from the use of the Internet and financial services in the mobile banking context and the least effect originating from bank branches, and 2) The results show that a positive and significant effect of financial deepening on economic growth is observable, which is consistent with the theory of supply-led capital.
Originality/Value: This research is of major importance to policymakers because it provides insights into the components of financial innovation that enhance growth in a country, taking into account that some aspects of innovation can delay growth, as illustrated during the global financial crisis.

Keywords


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