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Modelling the causal linkages between trade openness, innovation, financial development and economic growth in OECD Countries

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  • Walid Belazreg
  • Kais Mtar

Abstract

Using a panel vector auto-regressive model, we study interactions between trade openness, innovation, financial development, and economic growth in 27 OECD countries between 2001–2016. We focus on four-way linkage between these variables. Our empirical results show that there is a neutral relationship between economic growth and innovation, between innovation and financial development and between innovation and trade. Similarly, we have found a unidirectional relationship between economic growth and financial development and between financial development and trade. Finally, our results show a bidirectional relationship between economic growth and trade. Our empirical results show that among all, policy-makers need to invest more in human capital both in terms of developing entrepreneurial skills and education as well as creating better conditions for the development of creativity in the economy in order to improve national absorptive capabilities and develop the innovation potential of their economies.

Suggested Citation

  • Walid Belazreg & Kais Mtar, 2020. "Modelling the causal linkages between trade openness, innovation, financial development and economic growth in OECD Countries," Applied Economics Letters, Taylor & Francis Journals, vol. 27(1), pages 5-8, January.
    • Handle: RePEc:taf:apeclt:v:27:y:2020:i:1:p:5-8
    DOI: 10.1080/13504851.2019.1605581
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    Cited by:

    1. Hung, Ngo Thai, 2023. "Green investment, financial development, digitalization and economic sustainability in Vietnam: Evidence from a quantile-on-quantile regression and wavelet coherence," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).
    2. Kazeem Abimbola Sanusi & Zandri Dickason-Koekemoer, 2024. "Trade Openness, Financial Development and Economic Growth in Lesotho: BVAR and Time-varying VAR Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 14(3), pages 66-75, May.
    3. Chishti, Muhammad Zubair & Sinha, Avik, 2022. "Do the shocks in technological and financial innovation influence the environmental quality? Evidence from BRICS economies," Technology in Society, Elsevier, vol. 68(C).
    4. Bakhsh, Satar & Zhang, Wei & Ali, Kishwar & Anas, Muhammad, 2024. "Transition towards environmental sustainability through financial inclusion, and digitalization in China: Evidence from novel quantile-on-quantile regression and wavelet coherence approach," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    5. Elżbieta Roszko-Wójtowicz & Gagan Deep Sharma & Barbara Dańska-Borsiak & Maria M. Grzelak, 2024. "Innovation-Driven E-Commerce Growth in the EU: An Empirical Study of the Propensity for Online Purchases and Sustainable Consumption," Sustainability, MDPI, vol. 16(4), pages 1-28, February.
    6. Muhammad Usman Arshad & Muhammad Nadir Shabbir & Momna Niazi, 2023. "Trade Openness and Public Innovation: A Causality Analysis," SAGE Open, , vol. 13(3), pages 21582440231, September.
    7. Saleh Abdul Mola Al-Zaroog & Dr. Amer Abdul Fatah Baqir, 2020. "The Impact of Global Innovation on Economic Growth in Developing Countries," Journal of Social Sciences (COES&RJ-JSS), , vol. 9(2), pages 373-393, April.
    8. Li, Guangchen & Wei, Weixian, 2021. "Financial development, openness, innovation, carbon emissions, and economic growth in China," Energy Economics, Elsevier, vol. 97(C).
    9. Thanh Le & Ngoc Vu Bich & Sau Mai & Ha Nguyen & Hung Bui, 2023. "Financial Development and International R&D Spillovers Through Trade: Evidence From Developing Countries," SAGE Open, , vol. 13(1), pages 21582440231, March.
    10. Skare, Marinko & Gavurova, Beata & Rigelsky, Martin, 2023. "Innovation activity and the outcomes of B2C, B2B, and B2G E-Commerce in EU countries," Journal of Business Research, Elsevier, vol. 163(C).
    11. IWASAKI, Ichiro & ONO, Shigeki, 2023. "Economic Development and the Finance-Growth Nexus : A Meta-Analytic Approach," CEI Working Paper Series 2023-06, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    12. Dieudonné Mignamissi & Bernard Nguekeng, 2022. "Trade openness-industrialization nexus revisited in Africa," Economic Change and Restructuring, Springer, vol. 55(4), pages 2547-2575, November.

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