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Unlocking economic growth in South Asia: how energy shortages, digital trade, and financial development interact

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  • Feng Wang

    (Xi’an Jiaotong University)

  • Tayyaba Rani

    (Xi’an Jiaotong University)

Abstract

South Asian economies have long struggled with energy shortages and economic instability, factors that hinder their path to sustainable growth. While digital trade holds promise as a catalyst for economic expansion, its potential is uncertain due to financial limitations and persistent energy deficits. This study explores the dynamic relationship between digital trade, energy shortages, and economic growth in South Asia, with a focus on how financial development can influence these factors. By employing an advanced analytical approach, the findings reveal a complex, non-linear interaction between trade openness, energy shortages, and economic performance. The results suggest that while trade openness can have a positive impact on growth under certain conditions, energy shortages consistently exert a negative influence. Financial development shows a mixed effect, initially hindering growth but turning favorable as economies reach higher levels of development. Moreover, the interaction between financial development and energy shortages indicates that stronger financial systems can help offset the negative effects of energy scarcity, although this benefit diminishes as economies mature. The study emphasizes the need for stronger financial regulations, greater investment in renewable energy, and enhanced regional cooperation to foster sustainable and inclusive economic growth.

Suggested Citation

  • Feng Wang & Tayyaba Rani, 2025. "Unlocking economic growth in South Asia: how energy shortages, digital trade, and financial development interact," Economic Change and Restructuring, Springer, vol. 58(5), pages 1-31, October.
    • Handle: RePEc:kap:ecopln:v:58:y:2025:i:5:d:10.1007_s10644-025-09914-y
    DOI: 10.1007/s10644-025-09914-y
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    Keywords

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    JEL classification:

    • B17 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - International Trade and Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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