This study extensively analyzes the role and impacts of digitalization in the economy. Modern global trends show that digital technologies have become the main driving force of economic development. The article defines the concept and scope of the digital economy, reviews the impacts of digitalization on economic growth, productivity, innovation, and competitiveness. The literature review examines the economic impacts of digital transformation based on sources published in leading scientific journals around the world. The empirical part analyzes survey data based on a conceptual model developed using structural equation modeling (SEM). The results show that digitalization significantly increases economic efficiency and innovative activity, but factors such as digital infrastructure, human capital, and public policy play a crucial role in the success of this process. The analysis conducted on the example of Azerbaijan shows that the level of development of the digital economy in the country has increased, but the pace of development is weak compared to international standards. The article discusses the impact of digitalization on the economy based on global and local trends, provides practical recommendations for Azerbaijan, and provides future research directions.