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Investigating Causal Relations between Fixed Investment and Economic Growth

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Abstract

Few studies in the literature have dealt with the causality between fixed investment and economic growth. This study investigates the causal nexus of fixed investment and economic growth for a number of industrialized countries by constructing a vector autoregression (VAR) model for each country. On the basis of the new Granger non-causality procedure developed by Toda and Yamamoto (1995), the results show that fixed investment and economic growth are causally related in the long run for each country. In Canada and Italy the flow of causality is found to be bidirectional, in Germany the flow of causality is running in only one direction from fixed investment to economic growth, while in the remaining countries, France, Sweden, and the UK causality is running from growth to fixed investment.

Suggested Citation

  • Hatemi-J, Abdulnasser & Irandoust, Manucherhr, 2002. "Investigating Causal Relations between Fixed Investment and Economic Growth," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 55(1), pages 25-35.
    • Handle: RePEc:ris:ecoint:0195
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    Cited by:

    1. Nikolaos Dritsakis, 2004. "Exports, investments and economic development of pre-accession countries of the European Union: an empirical investigation of Bulgaria and Romania," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1831-1838.

    More about this item

    Keywords

    Fixed investment; economic growth; Granger non-causality; modified Wald’s test.;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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