Effect Of Digital Transformation To Economics Growth And Inflation: Evidence From Asia+3 Countries

Abstract

This research was conducted in order to find out the impact of digital transformation on the economic growth and inflation of ASEAN+3 countries, by finding inflation thresholds and factors affecting economic growth. Based on Huawei Global Connectivity Index (GCI), the research team divided the countries into two groups, which are the group with high digital conversion and the group with low digital conversion level. The threshold model is used to find the optimal inflation threshold and the Pooled OLS model uses data divided by two groups of countries during 2015-2018 to find factors affecting economic growth. The results show that the optimal inflation threshold for the group of countries with low digital conversion is 2.04% while the remaining group does not exist the threshold in this period although we have combined the Boostrap technique. In addition, while the trade balance in the group of countries with low digital transformation has a negative effect, public debt and budget deficit have positive effect on economic growth. In contrast to the group with high digital transformation, public debt and budget deficit have negative impacts; inflation, money supply and trade balance have positive impacts on economic growth.