Abstract:
This study investigates how information and communication technology (ICT) shapes the relationship between digital financial transactions and financial development, with specific implications for Sustainable Development Goals (SDG) 9 and 11. Using a balanced panel of 33 developed and developing economies over the period 2014-2021, the analysis distinguishes between the value and volume of mobile- and internet-based financial transactions. Employing feasible generalized least squares (FGLS), Driscoll-Kraay, and two-stage least squares (2SLS) estimators to account for cross-sectional dependence, heteroskedasticity, autocorrelation, and endogeneity, the results reveal that digital financial transactions significantly enhance financial development. The ICT index not only directly promotes financial development but also moderates this relationship, particularly by amplifying the effect of transaction volume. These findings underscore the critical role of digital infrastructure in fostering inclusive, efficient, and resilient financial systems. From a sustainability perspective, the results point to indirect implications for SDG 9 and SDG 11: enhanced digital finance ICT infrastructure promotes financial development by supporting innovation and facilitating digital financing, while simultaneously improving inclusive access to financial services in urban areas through digital platforms. Policy implications emphasize the need for coordinated investments in ICT infrastructure and adaptive regulatory frameworks to support sustainable financial development.
