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The causal relationship between patent growth and growth of GDP with quarterly data in the G7 countries: cointegration, ARDL and error correction models

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  • Josheski, Dushko
  • Koteski, Cane

Abstract

This empirical study investigates the dynamic link between patent growth and GDP growth in G7 economies. ARDL model showed that there exist positive relationship in long run between quarterly growth of patents and quarterly GDP growth. The error correction term suggests that 20,6 percent of the adjustment back to long run equilibrium of industrial production in G7 countries is corrected by 20,6% a year, following a shock like the one in 1974 , which in our study is controlled by a dummy variable D74. In the short run however at one or two lags there exist negative relationship between quarterly patents growth and quarterly growth of GDP. Johansen’s procedure for cointegration showed that long run multipliers are positive between the patent growth and GDP growth in G7 economies. Granger causality test showed that patent growth Granger cause GDP growth in G7 countries. Unrestricted VAR showed that there exists positive relationship between patent growth and GDP growth at two or three lags.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33153.

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Date of creation: 03 Sep 2011
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Handle: RePEc:pra:mprapa:33153

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Keywords: Cointegration; ARDL; Error correction models; Johasens’s procedure; Patent growth; GDP growth;

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  1. Jade Vichyanond, 2009. "Intellectual Property Protection and Patterns of Trade," Working Papers 1201, Princeton University, Department of Economics, Center for Economic Policy Studies..
  2. Oluwole Owoye, 1995. "The causal relationship between taxes and expenditures in the G7 countries: cointegration and error-correction models," Applied Economics Letters, Taylor & Francis Journals, vol. 2(1), pages 19-22.
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