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Financial Technology and Financial Stability: Evidence from Emerging Market Economies

Author

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  • Umair, Syed Muhammad
  • Ali, Amjad
  • Audi, Marc

Abstract

This study explores the influence of financial technology adoption on financial stability across 35 emerging market economies over the period 2015–2024. A fintech adoption index is constructed using data from the GSMA mobile money metrics, World Bank database, and Bank for International Settlements Fintech Statistics, including indicators such as mobile payment transactions, transaction volumes, and the number of fintech startups. Principal component analysis is employed to reduce dimensionality and enhance the validity and comparability of the index across countries and time. To assess the relationship between fintech adoption and financial stability, this study applies the cross-sectionally augmented autoregressive distributed lag model, which is particularly suitable for panel datasets with mixed integration orders and cross-sectional dependence features commonly observed in macroeconomic analyses of emerging economies. Regulatory quality, measured using the World Bank’s Worldwide Governance Indicators, is examined as a moderating factor. The results reveal that higher levels of fintech adoption improve financial stability, especially in environments with stronger regulatory frameworks. Robustness is confirmed through several diagnostic checks, including the CIPS unit root test, alternative model specifications, and interaction term analysis.

Suggested Citation

  • Umair, Syed Muhammad & Ali, Amjad & Audi, Marc, 2025. "Financial Technology and Financial Stability: Evidence from Emerging Market Economies," MPRA Paper 127487, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127487
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    References listed on IDEAS

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    Cited by:

    1. Fatima, Mishal & Audi, Marc & Ali, Amjad, 2026. "Nexus Among Financial Risks and Financial Performance: A Moderating Role of Corporate Governance," MPRA Paper 128921, University Library of Munich, Germany.
    2. Sajid, Muhammad Hammad & Ali, Amjad & Jadoon, Atif Khan, 2025. "Smart Tax Systems and Artificial Intelligence: Transforming Compliance and Enforcement in the Digital Era," MPRA Paper 127541, University Library of Munich, Germany.
    3. Sattar, Sarmad & Alvi, Aramish Altaf & Audi, Marc, 2025. "Economic, Social, and Institutional Drivers of FDI: A Comparative Study of Developed and Developing Economies," MPRA Paper 127562, University Library of Munich, Germany.
    4. Zahid, Haider & Audi, Marc & Ali, Amjad, 2026. "The Role of Cryptocurrency Regulations in Determining Financial Reporting Quality: An Empirical Analysis," MPRA Paper 129042, University Library of Munich, Germany.
    5. Rauf, Saima & Audi, Marc & Ali, Amjad, 2026. "Liquidity Risk Management in the Perspective of Asset Quality, Loan Quality & Governance: A Case Study of Pakistan Banking Industry," MPRA Paper 128920, University Library of Munich, Germany.

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    • G2 - Financial Economics - - Financial Institutions and Services

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