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

Abstract

Electronic payments have revolutionized economic development by promoting financial inclusion, improving efficiency, and fostering sustainable economic growth. By enabling seamless, secure, convenient, cost-effective financial transfers, digital payment systems have expanded access to banking services and e-commerce and facilitated trade, reduced transaction costs, and enhanced transparency, thereby boosting productivity and curbing corruption. 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 findings reveal a positive cointegrating relationship between GDP and digital payments, underscoring the connection between digitalization and economic expansion. The impulse response functions also imply the positive effect of digital transactions on GDP growth. These results suggest that policymakers should prioritize digital financial infrastructure development, enhance regulatory frameworks to support digital payment adoption, and implement long-term structural reforms focused on innovation and institutional stability to promote sustainable growth.

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