Aim and Introduction
One of the most critical criteria for assessing the development of the digital economy is financial deepening. Most analysts agree that financial deepening can accelerate economic growth. Economic policy orientations are increasingly aligned with the objectives of financial deepening, underscoring its growing significance. The digital economy is characterized by its large scale, rapid development, and strong connectivity—factors that demand more accurate and efficient financial support.
Financial deepening refers to the multi-dimensional strategy for establishing a market-oriented, multi-level financial system to foster economic growth. This approach includes the expansion and development of financial markets, the creation of innovative financial products and services, the reform of financial institutions, and the strengthening of financial supervision. The digital economy today extends beyond the realms of electronics, communication, and information industries, and has deeply integrated with the traditional economy. It no longer represents merely a part of the economy but increasingly defines it as a whole. Given its potential for growth and high profitability, the digital economy and its associated industries require substantial financial support. 
Financial deepening enhances the stock of liquid assets, expands financing channels, and directs capital flows toward competitive, high-yield digital sectors—thereby promoting their rapid development. Financial institutions are increasingly supporting emerging industries through targeted credit policies and are actively facilitating the digital transformation of traditional sectors. Furthermore, regional financial deepening improves the accessibility of financial intermediaries—such as banks and venture capital firms—to real-time corporate information. This reduces financing constraints, broadens financing channels, lowers capital costs, and provides firms with more diverse financial options.
For digital economy enterprises, financial deepening improves resource allocation efficiency through the integration of advanced technologies such as big data. It enables the effective investment of funds in critical areas of the digital economy, thereby fostering its development. As the digital economy expands, it becomes essential to manage the associated financial risks. Financial deepening addresses these concerns by reinforcing the financial market infrastructure, enhancing the regulatory environment, and adopting comprehensive risk management strategies to ensure the sector's sustainable and healthy growth.
Moreover, financial deepening spurs innovation in digital payment systems, digital currencies, financial technologies, and other related fields, resulting in more efficient and accessible financial services that underpin digital economy growth. Overall, financial deepening plays an important role in reducing financial constraints, enhancing resource allocation, managing financial risks, and providing vital financial services to support the robust and sustainable development of the digital economy.
Methodology
This study employs a random dynamic panel model using the Spatial Generalized Method of Moments—Dynamic Panel Data (SGMM-DPD-SDM) framework with two-stage Arellano-Bond estimation and random dynamic coefficients. To evaluate the effects of financial deepening, economic openness, government size, and economic growth on digital economy development in MENA countries, spatial econometric techniques are applied. In this model, the development of the digital economy is the key dependent variable. 
The selection of explanatory variables—namely financial deepening, economic openness, government size, and economic growth—is grounded in theoretical foundations. The inclusion of the lagged dependent variable in the model introduces autocorrelation between the explanatory variables and the error term, violating one of the classical assumptions of panel models. Consequently, the use of ordinary least squares methods in fixed and random effects models would yield biased and inconsistent estimates. Therefore, dynamic panel data techniques are employed to ensure robustness.
Findings
The results indicate that financial deepening significantly enhances digital economy development. Additionally, its spatial effects reveal that financial deepening in one country positively influences neighboring countries. According to the spatial lag estimation, the digital development of a given country is affected by the weighted average of digital development levels in neighboring countries, with an estimated effect of 0.82. 
The estimated coefficients for economic growth, government size, and economic openness are all positive and statistically significant, confirming their direct contribution to digital development. Moreover, these variables exhibit spatial spillover effects, further validating the presence of regional interdependencies. All spatial proximity-related variables are statistically significant, underscoring the importance of spatial and regional dynamics in understanding the influence of these factors on digital development.
Discussion and Conclusion
To promote financial deepening and foster the growth of the digital economy, the following recommendations are proposed based on the research findings:
Gradual reforms in the financial system should be pursued, with an emphasis on improving the efficiency and quality of financial services through the establishment of a sound regulatory framework. Strengthening the capacity of financial services for the real economy and encouraging traditional financial institutions to enhance their service offerings will ensure robust financial support. Simplifying approval processes for digital economy enterprises and lowering funding thresholds are also crucial for enabling the rapid development of this dynamic sector.
Encouraging innovation in financial products and services tailored to the needs of the digital economy—such as those based on e-commerce platforms and blockchain technologies—will drive further progress. Additionally, promoting direct financing through the gradual liberalization of capital markets and increasing their share in the financial system can significantly stimulate economic growth.
Welcoming foreign investment and facilitating the entry of international financial institutions will bring in much-needed capital and advanced financial technologies. These measures will not only enrich the financial ecosystem but also accelerate the digital transformation process across the MENA region.