The Impact of Innovation and Digital Currency on Imports

 
Aim and Introduction:
The priority of current economic activities is to formulate production plans and macroeconomic policies based on relative advantages. Understanding the relative advantages of countries enables them to optimize resource allocation and concentrate on industries with significant potential to enhance the value added to their production. This approach fosters sustainable economic growth, strengthens economic integration, and boosts global competition in international trade. Relative advantage refers to the production of goods based on economic efficiency, aimed at reducing costs and the overall price of products. This concept applies to importing necessary items that are either not produced domestically, are economically unfeasible to manufacture, or are in high demand from other countries at a lower cost. In addition to maximizing the productivity of production factors and focusing on both actual and potential expertise, dividing labor and participating in the international value production chain can lead to greater prosperity.
Innovations and digital sciences form the foundation of advanced technologies and knowledge essential for economic activities, particularly in developing countries. These innovations enable nations to achieve competitive advantages, especially through acquired relative advantages. Innovation in products, on one hand, boosts production and reduces dependence on imports. On the other hand, the surplus of products in global markets leads to an increase in per capita income, which consequently results in a rise in the import of goods. With innovation and the adoption of new technologies, the path to achieving competitive advantages becomes clear and practical.
 
Methodology
In this research, multivariate regression analysis is employed to examine the impact of innovation and digital currency on imports in selected countries from 2013 to 2021. The analysis utilizes the generalized method of moments with panel data, which allows for the simultaneous incorporation of time series and cross-sectional data in the model estimation. Data is extracted from databases such as the World Bank and analyzed using EViews 12 to calculate and estimate the coefficients of the variables.
 
Results and Discussion
The innovation sub-index, which includes inputs such as institutions, human capital and research, infrastructure, and market sophistication, has a positive and significant effect on imports in all instances. The development and expansion of competitive markets serve as the foundation for the establishment and operation of private sector productive forces. These markets drive supply and demand, ultimately influencing production, which is a crucial factor in fostering positive changes in imports. As markets become more sophisticated, institutions play a dynamic role as economic drivers within the production sector. By enacting supportive legislation, providing loans, and offering appropriate assistance, these institutions enhance production based on relative advantages. Consequently, this leads to an increase in surplus production in global markets, resulting in higher income. This, in turn, positively impacts the growth of imports.
The estimated coefficient of digital currency is positive but very small (close to zero) and negligible. This indicates that merchants still prefer to pay for expenses, purchases, and imports using cash, digital money, or credit. Consequently, the adoption of digital currency is unlikely to be a significant or effective factor in influencing imports.
The level of business sophistication has a significant negative relationship with imports. As training and skills of human resources improve, along with advancements in research, innovation, and creativity, new innovations and products are developed. Consequently, this reduces dependence on foreign countries, leading to a decrease in imports.
The exchange rate estimation coefficient is negative and significant in all cases. This indicates that, according to economic realities, the exchange rate has an inverse relationship with imports. When the exchange rate increases, the cost of imported products rises, leading to a decrease in imports. Conversely, the estimation coefficient for Trade Freedom demonstrates a positive and significant effect on imports. By engaging in integrated world trade and accepting the elimination of minimum tariff and non-tariff barriers, countries can participate in the value production chain, enhance specialization, and promote the division of labor, ultimately resulting in increased imports.
The formation of gross fixed capital has a positive and significant effect on imports in all cases. Capital goods produced domestically—through the enhancement and transfer of technology and its application in industries via new investments—have led to reduced costs, improved quality, and lower prices for domestic products. By increasing production and sales to foreign markets, this creates income that further drives imports.