Digital Payments and Sustainable Economic Growth: Transmission Mechanisms and Evidence from an Emerging Economy, Turkey

Abstract

This study investigates the impact of digital transactions on sustainable economic growth in Turkey, utilizing a vector autoregressive (VAR) model and quarterly data from 2006 to 2023. The results indicate a positive long-term association between digital payments and GDP. Granger causality tests and impulse response functions suggest a bidirectional relationship, highlighting mutual reinforcement between economic activity and digital financial adoption. The study also investigates three potential transmission channels linking digital payments to economic performance: household consumption, productivity, and financial intermediation. Evidence shows that digital payments are associated with increased consumption and financial sector activity, while the link to productivity is less conclusive. These findings imply that policymakers should prioritize digital financial infrastructure development and enhance regulatory frameworks to promote inclusive and sustainable economic growth.