Abstract
Despite the rapid pace at which digitalization has permeated various sectors of the economy, the assessment of its macroeconomic implications remains scarce in extant literature. This exploratory article provides a generalized perspective on the impact of ongoing digitalization on key economic indicators related to productivity and economic growth, inflation dynamics, financial markets, and currency demand. Deriving insights from contemporary literature in the field, we posit that the unprecedented advancements in technology can contest various postulates of conventional macroeconomic theory, thereby warranting agile policymaking to recalibrate the economy for the new digital order. This synoptic piece aims to encourage theoretical and empirical research works on the evolving issues of digitalization from the context of developing and emerging market economies.
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Notes
- 1.
Search costs refer to the cost of looking for information, whereas replication costs are the ones associated with the duplication of the product. Further, since information is stored in bits, there shall be no transactional costs. Effective matching of buyers and sellers on online platforms using data algorithms can significantly lower the verification and tracking costs (Source Goldfarb and Tucker, 2019).
- 2.
It can be shown that \(m=\frac{1+c}{c+r}\), where m, ‘c’ and ‘r’ denote money multiplier, currency–deposit ratio and reserves-to-deposit ratio, respectively. Thus, for given ‘r’, money multiplier will be inversely related to currency–deposit ratio: \(\frac{\partial m}{\partial c}=-\frac{1-r}{{\left(c+r\right)}^{2}}.\)
- 3.
ACI Worldwide, Real Time Payments, Global Data, 2023.
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Awasthy, S., Dhal, S. (2023). Macroeconomics of Digitalization—Evolving Issues and Perspectives. In: Srivastava, D.K., Shanmugam, K.R. (eds) India’s Contemporary Macroeconomic Themes. India Studies in Business and Economics. Springer, Singapore. https://doi.org/10.1007/978-981-99-5728-6_14
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