A Study on the Impact of Digital Finance on Regional Productivity Growth Based on Artificial Neural Networks

Abstract

The relationship between financial development and economic growth has become a hot topic in recent years and for China, which is undergoing financial liberalisation and policy reform, the efficiency of the use of digital finance and the deepening of the balance between quality and quantity in financial development are particularly important for economic growth. This paper investigates the utility of digital finance and financial development on total factor productivity in China using interprovincial panel data decomposing financial development into financial scale and financial efficiency; an interprovincial panel data model is used to explore the utility of digital finance on total factor productivity. This involves the collection and preprocessing of financial data, including feature engineering, and the development of an optimised predictive model. We preprocess the original dataset to remove anomalous information and improve data quality. This work uses feature engineering to select relevant features for fitting and training the model. In this process, the random forest algorithm is used to effectively avoid overfitting problems and to facilitate the dimensionality reduction of the relevant features. In determining the model to be used, the random forest regression model was chosen for training. The empirical results show that digital finance has contributed to productivity growth but is not efficiently utilised; China should give high priority to improving financial efficiency while promoting financial expansion; rapid expansion of finance without a focus on financial efficiency will not be conducive to productivity growth.