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Causality Nexus between Economic Growth, Inflation and Innovation

Author

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  • Trabelsi Ramzi

    (Université de Manouba
    Ecole Nationale d’Administration de Tunis, ENA)

  • Jouini Wiem

    (University of Tunis)

Abstract

This paper uses the panel vector error-correction model to explore the Granger-causality relationships between inflation, innovation and economic growth. This study covers 25 countries classified according to their firms’ extent of capacity for innovation between 1990 and 2014. The econometric analysis gave various images and very interesting results concerning the causality links between the variables in the short and long run, especially between the inflation and the two measures of innovation. Including two different innovation indicators offers a rich menu of possible causal patterns. We found that the innovation productivity is more responsive to the inflation in the most innovative countries. However, the innovation funding is more sensitive to the inflation in the less innovative countries. The originality of this study stems from three aspects: First, two measures of innovation are considered—innovation funding and innovation productivity. Second, the causality nature between the inflation and the innovation is not revealed yet in the literature. Third, using panel VEC model to discover the causality link between more than two variables in the short and long run and for two samples is an important contribution and a complicated method.

Suggested Citation

  • Trabelsi Ramzi & Jouini Wiem, 2019. "Causality Nexus between Economic Growth, Inflation and Innovation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(1), pages 35-58, March.
    • Handle: RePEc:spr:jknowl:v:10:y:2019:i:1:d:10.1007_s13132-016-0432-2
    DOI: 10.1007/s13132-016-0432-2
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    Cited by:

    1. Talknice Saungweme & Nicholas M. Odhiambo, 2021. "Inflation and Economic Growth in Kenya: An Empirical Examination," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(3), pages 1-25, September.
    2. Voxi Heinrich Amavilah & Antonio Rodríguez Andrés, 2024. "Knowledge Economy and the Economic Performance of African Countries: A Seemingly Unrelated and Recursive Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 110-143, March.
    3. Talknice Saungweme & Nicholas M. Odhiambo, 2021. "Inflation and Economic Growth in Kenya: An Empirical Examination," Advances in Decision Sciences, Asia University, Taiwan, vol. 25(3), pages 1-25, September.
    4. Larissa Batrancea & Malar Kumaran Rathnaswamy & Ioan Batrancea, 2022. "A Panel Data Analysis on Determinants of Economic Growth in Seven Non-BCBS Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 1651-1665, June.
    5. T. Saungweme & N.M. Odhiambo, 2021. "Inflation and Economic Growth in Kenya: An Empirical Examination," Working Papers AESRI-2021-13, African Economic and Social Research Institute (AESRI), revised Oct 2021.
    6. Talknice Saungweme & Nicholas M. Odhiambo, "undated". "Inflation And Economic Growth In Kenya: An Empirical Examination," Working Papers AESRI04, African Economic and Social Research Institute (AESRI).

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    More about this item

    Keywords

    Economic growth; Inflation; Innovation; Granger-causality; Panel VECM;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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