The effect of ICT investment on economic growth in the United States: A smooth time-varying cointegration approach

Abstract

In examining the effect of Information and Communication Technology (ICT) investment on economic growth, fixed coefficient cointegration analysis is the most common methodology used in prior studies. However, it might not be an appropriate analytical tool, because the parameter of ICT investment impact on economic growth might not be constant, but could vary over time. Therefore, this study estimated the time-varying effect of ICT investment on national economic growth by adopting the time-varying cointegrating regression method. Time series data from the U.S. Department of Commerce were gathered from 1969:Q1 to 2014:Q2 for a total of 182 observations. The validity test results of the proposed time-varying cointegration model support this model over the fixed coefficient cointegration model. In addition, the empirical results from the time-varying cointegration model suggest that ICT investment has positively influenced economic growth (GDP). The study also reveals that the effect of ICT investment on GDP has a repeated pattern of increase and decrease around every 10 years. © 2015 International Information Institute.