The Digitalization-Growth Nexus: Some Empirical Evidence from Four Regions with a Muslim Majority

Purpose: The study aims to investigate whether regional variations exist in the development of the digital economy and how they impact growth in the four global regions where Muslims predominate.

Design/methodology/approach – This study conducts an empirical examination of 48 countries with a Muslim majority divided into four regions (Middle East and North Africa region, Europe and Eurasia region, South Asia, the East Asia region, and the Pacific and Africa region) between 2000 to 2021. The study employs the Kao Residual Cointegration Test and the Long-run Valuation of Fully Modified Ordinary Least Squares (FMOLS/DOLS-Dynamic). A certain number of specific variables in the econometric model will be employed to measure the level of digitization on economic growth, such as: Digital economy infrastructure proxied by Individuals using the internet; Digital economic openness proxied by ICT product exports; and Digital technology competitiveness proxied by Research and Development as share of GDP

Findings: The findings of the study indicate that despite the fact that the digital economy made a positive contribution to economic growth in both Sub-Saharan Africa and Europe and Euroasia, the impact on these regions is less than that on the Middle East and North Africa, South Asia, East Asia, and the Pacific countries due to the underdeveloped infrastructure of the digital economy. There is a clear geographical imbalance in the development of the digital economy across 48 nations with a majority of Muslims.

Practical implications: The results of this paper are important for national policymakers to continue with the promotion of development strategies for the implementation of digital technologies in local industries.

Originality/value: To the best knowledge of the author, there are no more empirical studies that cover a set of 48 countries in the Muslim world, dealing with the newest set of data and measuring the contribution of the digital economy to growth.

Keywords: digital economy, economic growth, the Muslim world, panel cointegration model.