Working Paper Series: Special Edition of 2016 to 2018 Interns

Table 1: The impact of Financial Innovation on Economic Growth (Dependent variable is logged per capita GDP) Model 1 Model 2 Model 3

Model 4

VARIABLES

CTR

lPOST

CTR

0.0271** (0.0113) 0.0265*** (0.00439) 0.0110** (0.00436) -0.0136* (0.00748)

0.0160

(0.00986) 0.0217*** (0.00384) 0.00165 (0.00405) 0.00112 (0.00687)

GCF

0.0300*** (0.00436) 0.0104** (0.00440) -0.00437 (0.00686) 0.178* (0.0942)

0.0238*** (0.00373) 0.00162 (0.00388) 0.00815 (0.00599) 0.196** (0.0779) 0.0104*** (0.00162) 7.365***

TO

GEXP

lPOST

PSC

0.00971*** (0.00168) 8.781***

Constant

9.136*** (0.225)

7.894*** (0.721)

(0.202)

(0.601)

Observations R-squared

91

91

91

91

0.391 0.580 Note: The dependent variable is the logged per capita GDP. The Pooled OLS estimation model. Sample period 2004-2016. Standard Errors are in parentheses. *, **, *** indicate statistical significant 10%, 5% and 1% respectively. The number of point of sales terminals was statistically significant in models 2 and 4 at the 10.0 per cent and 5.0 per cent levels, respectively. The interpretation of the results is that consumption is likely to be stimulated as more merchants and consumers make use of the technology. Additionally, the efficiency gains brought about by the technology, such as ease of use, prompt processing and worldwide acceptance, among others, are likely to further impact the volume of business transacted. Overall, point-of-sales terminals and card transaction have a positive effect on growth and are consistent with a priori expectations. The findings support the arguments that financial innovation encourages economic activity within the ECCU. The ease of conducting financial transactions is perhaps the key incentive for the use of electronic payment systems. These payment systems have several advantages over traditional modes of payment. According to Slozko and Pelo (2014), the 0.376 0.562

72