The Dynamics of Digitalization and Urban Development on the Growth of the Economy: A Panel Data Analysis

Previous research has demonstrated the relationship between digital and urban growth through a variety of variables. This article explores the effects of digitalization and urban development on economic growth. The analysis takes place between 2005 and 2022 in 22 Muslim-Arab nations. This work proposes a novel empirical approach based on principal component analysis to construct a digital index. To address any endogenous issues, we use a two-stage least-squares estimation. We also utilize the pooled mean group estimation to examine the short-run and long-run relationships between the variables. Our findings imply that digitalization and urban growth have a beneficial economic impact. Digitalization has a positive impact on economic growth in the short and long term. Second, urbanization and economic growth provide substantial negative effects in the short run and long run. As a result, policies should be implemented to encourage urban development, which will contribute to economic growth in these countries. These innovative empirical findings will assist policymakers' new ideas in developing digital and urban development policies that promote long-term economic growth.