THE RELATIONSHIP BETWEEN TELECOMMUNICATION INVESTMENTS AND ECONOMIC GROWTH IN DEVELOPED AND EMERGING COUNTRIES: PANEL CAUSALITY ANALYSIS

Abstract

The importance given to telecommunication investments is increasing at a great rate particularly for developed and emerging economies under the impact of globalization. The potential impact of telecommunication infrastructure investments on economic growth in the globalizing world is a question that needs to be investigated. The objective of the study is to explore whether this channel of interaction, which is believed to exist for developed economies, is valid for emerging economies. Current empirical model has been generated for 12 developed and 10 emerging economies as including the 1975-2009 periods. Differently from the previous studies; cross section dependency and heterogeneity conditions were taken into account in the panel causality analysis performed. Results show a one-way causality relationship from telecommunication investments to economic growth for Canada, Denmark, Sweden and the United States among developed economies and China from the emerging countries. The results highlight the telecommunication investments as an effective policy tool to feature economic growth in the mentioned countries.