Credit to GDP ratio: to examine whether technological innovation had impact on credit-to-GDP ratio through cross-country evidence

Abstract

In an increasingly interconnected and technology-driven world, digitalization and financial technology (fintech) have significantly shaped economies. This project aimed to examine the impact of digitalization and fintech on the credit-to-GDP ratio of the country, a crucial indicator of financial stability and economic progress. The project employed regression analysis to link digitalization, fintech indicators, and credit-to-GDP ratios in a sample of economies. The results revealed essential insights illuminating the intricate interplay between technology and the credit-to-GDP ratio.

The model fit measures provided valuable information about the overall effectiveness of the regression model. The coefficient of determination (R-squared) indicated that approximately 36.9% of the variability in the credit ratio could be explained through the predictor variables, namely:

Individuals using the internet (% of population) as a proxy for technology adoption,

Digital transaction value (in billion USD) as a proxy for fintech adoption by the country, and

ATM availability (per 100,000 adults) as a proxy for the digitalization of the banking system.

The adjusted R-squared of 0.352 considered the trade-off between model complexity and explanatory power, suggesting that about 35.2% of the variability could be explained while accounting for the number of predictors.