Evaluating the effect of digital payments on the Philippines’ economic growth in the pandemic era
Date
2023-01
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Abstract
This paper examines the effect of digital payments on economic growth in the Philippines during the
COVID-19 pandemic era. We apply ordinary least squares regression to explore how the volume of digital
payments transactions affects economic growth proxied by the Purchasing Managers’ Index (PMI). The
regression also involves other indices which act as explanatory variables, such as the Philippine Stock
Exchange Index (PSEi) and the Industrial Production Index (IPI). We also analyzed nonlinear effects that
digital payments may have on economic growth, as well as how the potential influence that digital
payments on growth may be affected by the introduction of COVID-19 lockdown restrictions imposed on
society. This study covers the period January 2019 to June of 2022. The results show that the volume of
digital payments has a significantly positive, diminishing effect on economic growth in the short run. The
PSEi also maintains a significant positive relationship with growth, while the IPI’s effect can vary. The
results also show that in the period of 2020-2022 marked by the height of the health crisis in the country,
digital payments had a higher effect on economic growth, more stringent policies negatively affected
economic growth, and the stringency of lockdown policies exerted an independent, positive effect on
digital payments as well.
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Keywords
COVID-19, digital payments