Rostyslav Shchokin

Type of the article: Research Article

Abstract
Money laundering threatens global financial integrity, while digital governance is increasingly seen as a tool to enhance transparency and regulatory capacity. This study operationalized digital governance through the United Nations E-Government Development Index, which captures the scope and quality of online public services, telecommunications infrastructure, and human capital. The paper aims to examine whether improvements in e-government development are associated with measurable reductions in systemic money-laundering vulnerabilities at the country level. The study uses an unbalanced panel of 171 countries for 2012–2024 (982 observations). Fixed- and random-effects models with Box–Cox transformations were estimated, with the Hausman test guiding model selection and cluster-robust and Driscoll–Kraay standard errors ensuring reliable inference. The results demonstrate a statistically significant and economically meaningful inverse relationship between e-government development and money-laundering risk, measured by the Basel AML Index. In the preferred fixed-effects specification, the coefficient on the transformed EGDI is –1.56 (p < 0.001), indicating that within-country improvements in digital governance capacity are associated with substantial reductions in AML vulnerability over time. This effect remains robust across alternative error structures, with 95% confidence intervals of [–1.96, –1.17] under cluster-robust estimation and [–1.75, –1.38] under Driscoll–Kraay correction. The inclusion of country-specific fixed effects reveals considerable structural heterogeneity in baseline AML risk (approximately 1.15–3.90), while time effects display limited variation over the sample period (approximately 2.11–2.19), confirming that the risk-reducing role of digital governance is not driven by specific countries or particular years.

Acknowledgment
This article was prepared based on the results of a study funded by the Ministry of Education and Science of Ukraine, “GovTech for Ukraine: A Digital, Secure, Transparent, and Equitable State in Times of War and Post-War Reconstruction” (registration number: 0126U000544).

Type of the article: Research article

Abstract
In transition economies, banking sector integrity is a critical prerequisite for economic resilience against exogenous shocks. This study evaluates the direct and indirect transmission channels through which public digital governance and systemic crisis shocks relate to banking stability and financial inclusion across 22 transition economies. Utilizing structural equation modeling (SEM) and path analysis based on annual panel data from 2003 to 2024 – supplemented by latent factor analysis, Dumitrescu-Hurlin causality tests, and post-estimation Wald tests – we analyze structural macro-level associations. Empirical results show that the static factor association between digital governance and banking stability is positive but marginally significant (β = 4.102, p = 0.079). In short-run dynamic first-difference specifications, no statistically significant immediate responsiveness is observed (β = 0.027, p = 0.516). Concurrently, improved banking stability significantly co-moves with financial inclusion (β = 0.042, p = 0.008), driven primarily by non-performing loan suppression (λ = −3.684, p = 0.018) and corruption control (λ = 0.034, p = 0.006). Systemic crisis shocks persistently depress both banking stability (β = −0.130, p = 0.009) and citizen financial engagement (β = −0.027, p < 0.001). Post-estimation Wald tests confirm cross-regional slope homogeneity (χ2(1) = 0.48, p = 0.487 for governance-to-stability; χ2(1) = 0.03, p = 0.855 for stability-to-inclusion). Contrary to conventional assumptions, public digital governance does not act as an immediate countercyclical shock absorber, highlighting the necessity of pairing digital reforms with long-term structural policies.

Acknowledgments
Oleksii Zakharkin’s contribution to this article was prepared as part of a research project funded by the Ministry of Education and Science of Ukraine, titled “GovTech for Ukraine: A Digital, Secure, Transparent, and Equitable State in Times of War and Post-War Reconstruction” (registration number: 0126U000544).