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The role of R&D and economic policy uncertainty in Sri Lanka’s economic growth

Author

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  • Chandranath Amarasekara

    (Central Bank of Sri Lanka)

  • Bernard Njindan Iyke

    (Monash University)

  • Paresh Kumar Narayan

    (Monash University
    Monash University)

Abstract

In this paper, we assess the role of investment in research and development (R&D) and economic policy uncertainty (EPU) in Sri Lanka’s economic growth experience. We do this by first determining which endogenous growth theories best explain the evolution of total factor productivity (TFP) in the country. Using historical time series data (1980–2018), we find that semi-endogenous growth theories best explain the evolution of TFP in Sri Lanka. This evidence suggests that R&D is critical to the country’s TFP expansion. We find that, through R&D, EPU has a crucial detrimental impact on TFP growth, although it is short-lived. Our findings are robust and have important implications for R&D investment and for moderating EPU.

Suggested Citation

  • Chandranath Amarasekara & Bernard Njindan Iyke & Paresh Kumar Narayan, 2022. "The role of R&D and economic policy uncertainty in Sri Lanka’s economic growth," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-19, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-021-00322-5
    DOI: 10.1186/s40854-021-00322-5
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    1. Wen, Jun & Zhao, Xinxin & Fu, Qiang & Chang, Chun-Ping, 2023. "The impact of financial risk on green innovation: Global evidence," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

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    More about this item

    Keywords

    Total factor productivity; Research and development; Endogenous growth theories; Economic policy uncertainty; Sri Lanka;
    All these keywords.

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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