Assessing the Role of Digital Finance on Shadow Economy and Financial Instability: An Empirical Analysis of Selected South Asian Countries

The impact of digital inclusive finance on SMEs' technological innovation activities-Empirical analysis based on the data of new third board enterprises

The landscape of financial technology is undergoing a continuous evolution, driven by the relentless advancement of information technology. In this transformative milieu, digital finance has emerged as a novel financial paradigm, offering a blueprint for fostering inclusive finance. With a particular emphasis on its implications for Small and Medium-sized Enterprises (SMEs), this article harnesses a comprehensive dataset spanning the years 2011 to 2021, encompassing digital inclusive finance and SMEs listed on the SME board. Employing fixed effects models, this study performs a regression analysis to verify the driving effect of digital inclusive finance on SMEs' innovation activities. The findings unequivocally affirm the potency of inclusive finance in ameliorating the longstanding financing constraints that have historically constrained the growth trajectory of SMEs. Furthermore, the study elucidated the nuanced nature of the promotional impact of digital inclusive finance on SMEs, contingent upon their distinct property rights and technological attributes. Specifically, the empirical findings unveil a discernible pattern wherein digital inclusive finance exerts a conspicuously stronger promotional effect on non-state-owned enterprises and high-tech SMEs' endeavors in technological innovation. The conclusions derived from this research furnish a salient point of reference for governmental authorities engaged in the formulation and advancement of digital inclusive finance strategies, thereby imparting strategic guidance for the cultivation of innovation and holistic development within the SME sector.

Does the Digital Economy Promote the Reduction of Urban Carbon Emission Intensity?

The impact of the digital economy is increasing, and its environmental effect has attracted more and more attention. The digital economy promotes the improvement of production efficiency and the government's environmental governance capacity, and contributes to the reduction of urban carbon emission intensity. In order to study the impact of digital economy development on urban carbon emission intensity, this paper analyzes the theoretical basis of the digital economy on the reduction of carbon emission intensity, and then, based on the panel data of cities from 2011 to 2019, uses the two-way fixed effect model for empirical testing. The regression results show that the development of the digital economy has promoted the reduction of carbon emission intensity of cities, promoted the green transformation and upgrading of cities, and lays a foundation for China to achieve carbon peaking and carbon neutralization through the improvement of human capital investment and green innovation level. The basic conclusion is robust by changing core explanatory variables, changing samples, replacing regression methods, and shrinking and truncating tests. The impact of the digital economy on urban carbon emission intensity varies with the location, grade and size of the city. Specifically, the development of the digital economy in cities in the eastern and central regions, cities at or above the sub provincial level, large cities and non-resource-based cities has promoted the reduction of urban carbon emission intensity. In terms of resource-based cities, the development of the digital economy in renewable resource-based cities and resource-based cities dominated by iron ore and oil mining has promoted the decline in urban carbon emission reduction intensity.

Impact of green finance and environmental protection on green economic recovery in South Asian economies: mediating role of FinTech

Green finance and digital finance are cornerstones of sustainable growth. Given the significant investment and funding challenges that South Asia's new energy development faces, the potential role of digital finance in this situation is uncertain. Applying panel regression analysis and using a two-step generalized method of moments (GMM) to eliminate endogeneity, this study examines the connections between green finance, financial technology (FinTech), and high-quality economic development using data from three South Asian economies between 2000 and 2018. The study demonstrates that India, Bangladesh, and Pakistan use multiple green financing initiatives, resulting in a considerable decrease in commercial CO2 across the review period, which extends environmental protection and confirms the green economic recovery. FinTech development also helps reduce CO2 emissions, making a favorable contribution. Selected South Asian countries are on track to become world leaders in green finance strategy implementation, and authorities must speed up the development of green recovery and services and strengthen banking institutions' ability to provide green loans. FinTech and green finance, it turns out, have a significant impact on green economic development. The study also has policy implications for the associated stakeholders.

An Asymmetric Analysis of the Influence That Economic Policy Uncertainty, Institutional Quality, and Corruption Level Have on India’s Digital Banking Services and Banking Stability

Motivated by the unprecedented high levels of recent economic policy uncertainty, the current study examines the influence of economic policy uncertainty, institutional quality, and corruption level on the Indian banking stability and the growth of digital financial services. Using the Baker et al.’s economic policy uncertainty index and nonlinear autoregressive distribution lag model on the data set of banking variables from 2004 to 2019, we infer the following findings. The unit root and the structural break tests confirm the presence of structural breaks and mixed order of integrations. Besides, the long-run nonlinear autoregressive distribution lag results substantiate a long-run asymmetric relationship between the explanatory variables (economic policy uncertainty, institutional quality, corruption level) and the outcome variables (digital banking services and banking stability). The study reveals that a 1 percent increase in the economic policy uncertainty increases nonperforming loans (proxy to measure banking stability) by 1.48 percent and decreases Z-score (proxy to measure banking stability) by −1.12 percent. Likewise, a 1 percent increase in policy uncertainty reduces the progress of digital financial services by −1.23 percent in India. In addition, the study also depicts a long-run cointegration between the explanatory and the outcome variables. Overall, the study shows significant evidence that policy uncertainty, corruption, and institutional regulation hampers Indian banking stability and digital growth. The study offers several policy implications to understand the adverse effects of economic policy uncertainty on the Indian banking sector.