Asymmetric threshold effects of digitization on inflation in emerging markets
Abstract This paper analyzes the dynamic asymmetric effects of digitization on domestic inflation for a sample of 54 advanced economies (AEs) and emerging markets (EMs) over the period 2004–2018. Using Katz and Calorda’s Digital Ecosystem Development Index and employing the system Generalized Method...
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| Format: | Article |
| Language: | English |
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SpringerOpen
2024-01-01
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| Series: | Financial Innovation |
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| Online Access: | https://doi.org/10.1186/s40854-023-00545-8 |
| _version_ | 1797349810601197568 |
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| author | Noha Emara Daniela Zecheru |
| author_facet | Noha Emara Daniela Zecheru |
| author_sort | Noha Emara |
| collection | DOAJ |
| description | Abstract This paper analyzes the dynamic asymmetric effects of digitization on domestic inflation for a sample of 54 advanced economies (AEs) and emerging markets (EMs) over the period 2004–2018. Using Katz and Calorda’s Digital Ecosystem Development Index and employing the system Generalized Method of Moments (GMM) estimation methodology, the results of the paper reveal that the improvement in digitization has a statistically significant nonlinear deflationary effect with an exact threshold level of 43.22 points, that is, that the marginal effect of the digital penetration is larger when its level is lower than the threshold level. For EMs, with a level of digitization below the average of our full sample, policymakers must continue to invest in and expand on their digital ecosystem until the threshold level is achieved. Our results show that investment in human capital and improvement in governance can reinforce these deflationary effects. Hence, to obtain the maximum positive impact of increasing digitization on domestic inflation, EM governments should focus on maximizing school enrollment, controlling corruption, establishing rule of law, protecting the right to freedom of opinion and expression, and implementing accountability measures. |
| first_indexed | 2024-03-08T12:35:50Z |
| format | Article |
| id | doaj.art-cf80e17bb0a7482a9e6139a668765d17 |
| institution | Directory Open Access Journal |
| issn | 2199-4730 |
| language | English |
| last_indexed | 2024-03-08T12:35:50Z |
| publishDate | 2024-01-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj.art-cf80e17bb0a7482a9e6139a668765d172024-01-21T12:31:11ZengSpringerOpenFinancial Innovation2199-47302024-01-0110113210.1186/s40854-023-00545-8Asymmetric threshold effects of digitization on inflation in emerging marketsNoha Emara0Daniela Zecheru1Department of Economics, Rutgers UniversityDepartment of Economics, Barnard College, Columbia UniversityAbstract This paper analyzes the dynamic asymmetric effects of digitization on domestic inflation for a sample of 54 advanced economies (AEs) and emerging markets (EMs) over the period 2004–2018. Using Katz and Calorda’s Digital Ecosystem Development Index and employing the system Generalized Method of Moments (GMM) estimation methodology, the results of the paper reveal that the improvement in digitization has a statistically significant nonlinear deflationary effect with an exact threshold level of 43.22 points, that is, that the marginal effect of the digital penetration is larger when its level is lower than the threshold level. For EMs, with a level of digitization below the average of our full sample, policymakers must continue to invest in and expand on their digital ecosystem until the threshold level is achieved. Our results show that investment in human capital and improvement in governance can reinforce these deflationary effects. Hence, to obtain the maximum positive impact of increasing digitization on domestic inflation, EM governments should focus on maximizing school enrollment, controlling corruption, establishing rule of law, protecting the right to freedom of opinion and expression, and implementing accountability measures.https://doi.org/10.1186/s40854-023-00545-8InflationDigitizationSystem GMMAdvanced economiesEmerging markets |
| spellingShingle | Noha Emara Daniela Zecheru Asymmetric threshold effects of digitization on inflation in emerging markets Financial Innovation Inflation Digitization System GMM Advanced economies Emerging markets |
| title | Asymmetric threshold effects of digitization on inflation in emerging markets |
| title_full | Asymmetric threshold effects of digitization on inflation in emerging markets |
| title_fullStr | Asymmetric threshold effects of digitization on inflation in emerging markets |
| title_full_unstemmed | Asymmetric threshold effects of digitization on inflation in emerging markets |
| title_short | Asymmetric threshold effects of digitization on inflation in emerging markets |
| title_sort | asymmetric threshold effects of digitization on inflation in emerging markets |
| topic | Inflation Digitization System GMM Advanced economies Emerging markets |
| url | https://doi.org/10.1186/s40854-023-00545-8 |
| work_keys_str_mv | AT nohaemara asymmetricthresholdeffectsofdigitizationoninflationinemergingmarkets AT danielazecheru asymmetricthresholdeffectsofdigitizationoninflationinemergingmarkets |