The long-run relation among financial development, technology and GDP: a panel cointegration study

There has been a considerable increase in the use of Information and Communications Technology (ICT) across the globe since 1991. This article examines the dynamic relationship among financial development, ICT and Gross Domestic Product (GDP) per capita in a panel cointegration framework using 86 sample countries. The long-run relationships are identified using panel unit root tests, cointegration analysis and Dynamic Ordinary Least Squares (DOLS). The ICT indicators are proxied by the number of personal computers, Internet users and mobile phone subscribers. Our first finding is that personal computers and GDP per capita increase the liquidity, size and activity of financial systems. Second, the Internet and GDP per capita improve the liquidity, size, stock trading and activity of financial markets. Third, mobile phones and GDP per capita stimulate financial market liquidity, financial market size and credit expansion. The results provide a clear support for an equilibrium relation among financial development, ICT and GDP per capita.