THE ROLE OF DIGITALIZATION IN CHANGING THE ECONOMIC LANDSCAPE AND FINANCIAL MARKET MECHANISMS
Abstract
In the article, the transformative role of digitalization in reshaping the economic landscape and the mechanisms of financial markets is investigated. The relevance of studying the role of digitalization in economic and financial transformation lies in its capacity to shape policy, steer business strategy, and contribute to a more equitable and efficient global economic system. The aim of the article is to explore the theoretical foundations of digitalization and its impact on economic development and financial markets, with a particular focus on the European Union. Theoretical underpinnings of digitalization and digital transformation are elucidated, including the multifaceted impact of digital technologies—from blockchain and artificial intelligence to mobile banking—on a country's economic condition, financial operations, and market efficiency. The influence of digital technologies on market liquidity and volatility is demonstrated. It is determined that the application of AI and machine learning in financial markets has revolutionized investment strategies, risk management, and fraud detection. The process of digitalization within the European Union, a leader in adopting digital transformation, is examined. Hypotheses are posited and substantiated that a country's level of economic development and the volume of digital capital engagement are directly dependent on the country's digitalization level. The analysis is based on data from EU countries for the years 2019-2022, encompassing 108 observations, using correlation analysis. Challenges associated with the digitalization process in the European Union are identified. Digitalization is found to have significantly lowered barriers to entry for small and medium-sized enterprises and entrepreneurs, democratizing access to global markets and opening opportunities for innovation and growth across various economic sectors. By synthesizing theoretical ideas with empirical evidence, this study seeks to offer a comprehensive understanding of the consequences of digitalization for economic and financial dynamics in the modern world.
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