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Fueling financial development: The crucial role of generative AI financing across nations

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  • Siddik, Abu Bakkar
  • Li, Yong
  • Du, Anna Min
  • Migliavacca, Milena

Abstract

This study examines the impact of Generative AI (GAI) financing on financial development (FD) across 21 countries using cross-sectional data from 2020 to 2022. Employing both simple linear regression and two-stage least squares (2SLS) to address endogeneity, we find that GAI financing significantly contributes to financial development, with stronger effects observed in Asian and non-European regions. Regional heterogeneity is evident, highlighting varying impacts across different subcontinents. Policy implications suggest promoting GAI ecosystems, attracting foreign investment, and enhancing publicity for GAI startups. The study highlights the need for future research on the ethical implications and dynamic effects of GAI financing.

Suggested Citation

  • Siddik, Abu Bakkar & Li, Yong & Du, Anna Min & Migliavacca, Milena, 2025. "Fueling financial development: The crucial role of generative AI financing across nations," Finance Research Letters, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015484
    DOI: 10.1016/j.frl.2024.106519
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    Cited by:

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    Keywords

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    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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