Impact of ICT Diffusion on the Economic Growth and Its Volatility: A Case Study on African and MENA Countries
Keywords:
Information and Communication Technologies (ICT), growth, volatility, S-GMM
Abstract
In this paper, we examine the empirical relationship between ICT diffusion and the interaction between economic growth and its volatility for 30 African and MENA countries between 1998 and 2020. To achieve this, we calculated the interaction between mean growth and its fluctuations over different non-overlapping intervals (3 years) using inverse hyperbolic sine calculations. A composite ICT indicator was used, including access to ICT, capacity to use ICT and ICT-related skills. Using the S-GMM technique that addresses multiple econometric questions, the results show that ICT penetration has a statistically negative effect on the interaction of growth and its turnover. This means that higher ICT penetration may lead to slower and more volatile growth.
However, by introducing an interaction variable (defined as the base level of GDP multiplied by the ICT development index), the estimates reveal that these variables have a statistically positive effect on the interaction between growth and its volatility. When ICT diffusion interacts with a country's level of economic development, it can have a positive impact on economic growth and its volatility. The results show that the impact of ICT diffusion depends on the specific characteristics of a country, especially its level of economic development. In particular, the marginal effects of ICT are significant for high-income countries.
References
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Blundell, R. & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. J. Econom., 87, 115–143.
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Enowbi, B.M. (2008). The role of telecommunication infrastructure in the regional Economic Growth of Africa. Quarterly Journal of Economics, 54, 047-055.
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Ferraro, D. (2017). Volatility and slow technology diffusion. European Economic Review, 96, 18–37. https://doi.org/10.1016/j.euroecorev.2017.04.005
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Grunig, J. (2009). Paradigms of public relations in an age of digitalization. PRism, 6(2), 19. http://www.prismjournal.org/index.php?id=index
Hassan, A. K., & Islam, M. R. (2005). Temporal causality and dynamics of financial development, trade openness, and economic growth in Vector Auto Regression (VAR) for Bangladesh, 1974-2003: Implication for poverty reduction. Journal of Nepalese Business Studies, 2(1), 1–12. https://doi.org/10.3126/jnbs.v2i1.50
Imbs, J. (2007). Growth and volatility. Journal of Monetary Economics, 54(7), 1848–1862. https://doi.org/10. 1016/j.jmoneco.2006.08.001
Inklaar, R., O’Mahony, M. & M. P. Timmer. (2005). ICT and Europe’s productivity performance, industry-level growth account comparisons with the United States. Review of Income and Wealth, 51(4), 505-536.
Ishida, H. (2015). The effect of ICT development on economic growth and energy consumption in Japan. Telematics and Informatics, 32(1), 79–88. https://doi.org/10.1016/j.tele.2014.04.003
ITU (2018). Measuring the information society report 2018. Retrieved from https://www.itu.int/en/ITU-D/Statistics/Pages/publications/misr2018.aspx
ITU. (2021). Connectivity in the least developed countries: Status report 2021. A joint publication by the International Telecommunication Union (ITU) and the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS).
Jorgenson, D. W. (2001). Information technology and the US economy. American Economic Review, 91(1), 1–32. https://doi.org/10.1257/aer.91.1.1
Koutroumpis, P. (2009). The economic impact of broadband on growth: A simultaneous approach. Telecommunications Policy, 33(9), 471–485. https://doi.org/10.1016/j.telpol.2009.07.004
Kroft, K., & Lloyd-Ellis, H. (2002). Further cross-country evidence on the link between growth, volatility and business cycles. Queens University, Department of Economic, Working Paper.
Lee, S. H., Levendis, J., & Gutierrez, L. (2012). Telecommunications and economic growth: An empirical analysis of sub-Saharan Africa. Applied Economics, 44(4), 461–469. https://doi.org/10.1080/00036846.2010.508730
Lee, S.-Y. T., Gholami, R., & Tong, T. Y. (2005). Time series analysis in the assessment of ICT impact at the aggregate level–lessons and implications for the new economy. Information & Management, 42(7), 1009–1022. https://doi.org/10.1016/j.im.2004.11.005
Myovella G., Karacuka M., & Haucap J. (2020). Digitalization and economic growth: a comparative analysis of Sub-Saharan Africa and OECD economies. Telecommun. Pol., 44(2), 101856. https://doi.org/10.1016/j.telpol.2019.101856
Nasab, E. H., & Aghaei, M. (2009). The effect of ICT on economic growth: Further evidence. International Bulletin of Business Administration, 5(2), 46–56.
Nguyen, T. P., Dinh, T. T. H., Tran Ngoc, T., & Duong Thi Thuy, T. (2022). Impact of ICT diffusion on the interaction of growth and its volatility: Evidence from cross-country analysis. Cogent Business & Management, 9(1), 2054530. https://doi.org/10.1080/23311975.2022.2054530
Nguyen, T. P., Dinh, T. T. H., Tran Ngoc, T., & Duong Thi Thuy, T. (2022). Impact of ICT diffusion on the interaction of growth and its volatility: Evidence from cross-country analysis. Cogent Business & Management, 9(1), 2054530.
Niebel, T. (2018). ICT and economic growth – Comparing developing, emerging and developed countries. World Development, 104, 197–211. https://doi.org/10. 1016/j.worlddev.2017.11.024
Okogun, O. A. (2012). Economic Value of ICT Investment in Nigeria: Is it commensurate? . International Journal of Economics and Management Sciences, 1(10), 20-28.
Pohjola, M. (2001). Information Technology, Productivity and Economic Growth: International Evidence and Implications for Economic Growth. Oxford University Press.
Pohjola, M. (2002). The new economy: Facts, impacts and policies. Information Economics and Policy, 14(2), 133–144. https://doi.org/10.1016/S0167-6245(01)00063-4
Pradhan, R. P., Mallik, G., & Bagchi, T. P. (2018). Information communication technology (ICT) infrastructure and economic growth: A causality evinced by cross-country panel data. IIMB Management Review, 30(1), 91-103.
Ramey, G., & Ramey, V. A. (1995). Cross-country evidence on the link between volatility and growth. The American Economic Review, 85(5), 1138–1151 https://www.nber.org/papers/w4959
Roller, L.-H., & Waverman, L. (2001). Telecommunications infrastructure and economic development: A simultaneous approach. American Economic Review, 91(4), 909–923. https://doi.org/10.1257/aer.91.4.909
Sassi, S., & Goaied, M. (2013). Financial development, ICT diffusion and economic growth: Lessons from MENA region. Telecommunications Policy, 37(4–5), 252–261. https://doi.org/10.1016/j.telpol.2012.12.004
Skorupinska, A., & Torrent-Sellens, J. (2015). The role of ICT in the productivity of Central and Eastern European countries: cross-country comparison. Revista de Economía Mundial, 39, 201-221.
Solomon, E. M., & van Klyton, A. (2020). The impact of digital technology usage on economic growth in Africa. Utilities Policy, 67, 101104.
Stanley, T. D., Doucouliagos, H., & Steel, P. (2018). Does ICT generate economic growth? A meta-regression analysis. Journal of Economic Surveys, 32(3), 705–726. https://doi.org/10.1111/joes.12211
Tang, S. H. K. (2002). The link between growth volatility and technical progress: Cross-country evidence. Economics Letters, 77(3), 335–341. https://doi.org/10.1016/S01651765(02)00145-3
Temple, J. (1998). Initial Conditions, Social Capital and Growth in Africa. Journal of African Economies, 7, 309-347.
Timmer, M. P. & van Arky, B. (2005). Does information and communication technology drive EU-US productivity growth differentials? Oxford Economic Papers, 57(2005), 693–716. https://doi.org/10.1093/oep/gpi032
Venturini, F. (2009). The long-run impact of ICT. Empirical Economics, 37(3), 497–515. https://doi.org/10.1007/s00181-008-0243-9
Vu, K. M. (2011). ICT as a source of economic growth in the information age: Empirical evidence from the 1996–2005 period. Telecommunications Policy, 35(4), 357–372. https://doi.org/10.1016/j.telpol.2011.02.008
Vu, K., Hanafizadeh, P., & Bohlin, E. (2020). ICT as a driver of economic growth: A survey of the literature and directions for future research. Telecommunications Policy, 44(2), 101922. https://doi.org/10.1016/j.telpol. 2020.101922
Waverman, L., Meschi, M., & Fuss, M. (2005). The Impact of Telecoms on Economic Growth in Developing Countries. The Vodafone Policy Paper Series, 2(03), 10-24.
Yousefi, A. (2011). The impact of information and communication technology on economic growth: Evidence from developed and developing countries. Economics of Innovation and New Technology, 20(6), 581–596. https://doi.org/10.1080/10438599.2010. 544470
Zarnowitz, V. & Moore, G. (1986). Major changes in cyclical behaviour. In R. Gordon (Ed.), The American Business Cycle: Continuity and Change. Chicago, University of Chicago Press.
Andrianaivo, M., & Kpodar, K. R. (2011). ICT, financial inclusion, and growth: Evidence from African countries. IMF Working Papers, 2011(73), 1-44. https://www.elibrary.imf.org/view/journals/001/2011/073/article-A001-en.xml
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297. https://doi.org/10. 2307/2297968
Bahrini, R., & Qaffas, A. A. (2019). Impact of Information and communication technology on economic growth: Evidence from developing countries. Economies, 7(1), 21. https://doi.org/10.3390/economies7010021
Baquero Forero, M. del P. (2013). Mobile communication networks and Internet technologies as drivers of technical efficiency improvement. Inf. Econ. Pol., 25(3), 126–141. https://doi.org/10.1016/j.infoecopol.2012.11.004
Bellemare, M. F. (2018). Metrics Monday: Elasticities and the Inverse Hyperbolic Sine Transformation. Agricultural and Applied Economics.
Blanchard, O. & Simon, J. (2001). The long and large decline in U.S. output volatility. Brookings Papers on Economic Activity, No. 1.
Bloom, D. & Sachs, J. (1998). Geography, Demography and Economic Growth in Africa. Brookings Papers on Economic Activity, No. 2.
Blundell, R. & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. J. Econom., 87, 115–143.
Castellacci, F. (2011). Closing the technology gap? Rev. Dev. Econ., 15(1), 180–197. https://doi.org/10.1111/j.1467-9361.2010.00601.x
Cheng, C.-Y., Chien, M.-S., & Lee, -C.-C. (2021). ICT diffusion, financial development, and economic growth: An international cross-country analysis. Economic Modelling, 94, 662–671. https://doi.org/10.1016/j.econmod.2020.02.008
Counted, A.V. & Arawole, J.O. (2016). ‘We are connected, but constrained’: internet inequality and the challenges of millennials in Africa as actors in innovation. Journal of Innovation and Entrepreneurship, 5(1), 3. https://doi.org/10.1186/s13731-015- 0029-1
Da Silva, S. H., Tabak, B. M., Cajueiro, D. O., & Fazio, D. M. (2017). Economic growth, volatility and their interaction: What’s the role of finance? Economic Systems, 41(3), 433–444. https://doi.org/10.1016/j.ecosys.2016.10.008
Dewa M.T., van der Merwe A.F., & Matope S. (2018). Digitalisation OF SHOP-floor operations IN the SOUTH AFRICAN tool, die, and mould-making industry. S. Afr. J. Ind. Eng., 29(2), 153–170.
Dewan, S., & Kraemer, K. (2000). Information technology and productivity: Evidence from country-level data. Management Science, 46(4), 548–562. https://doi.org/10.1287/mnsc.46.4.548.12057
Easterly, W., Islam, R., & Stiglitz, J. (2000). Explaining growth volatility. Annual World Bank Conference on Development Economics. The World Bank.
Enowbi, B.M. (2008). The role of telecommunication infrastructure in the regional Economic Growth of Africa. Quarterly Journal of Economics, 54, 047-055.
Evangelista, R., Guerrieri, P., & Meliciani, V. (2014). The economic impact of digital technologies in Europe. Economics of Innovation and New Technology, 23(8), 802-824.
Fernández-Portillo, A., Almodóvar-González, M., & Hernández-Mogollón, R. (2020). Impact of ICT development on economic growth. A study of OECD European union countries. Technology in Society, 63, 101420. https://doi.org/10.1016/j.techsoc.2020.101420
Ferraro, D. (2017). Volatility and slow technology diffusion. European Economic Review, 96, 18–37. https://doi.org/10.1016/j.euroecorev.2017.04.005
Gómez-Barroso, J. L., & Marbán-Flores, R. (2020). Telecommunications and economic development– The 20th century: The building of an evidence base. Telecommunications Policy, 44(2), 101904. https://doi.org/10.1016/j.telpol.2019.101904
Gruber, H., & Koutroumpis, P. (2010). Mobile communications: Diffusion facts and prospects. Communications and Strategies, 77, 133–145.
Grunig, J. (2009). Paradigms of public relations in an age of digitalization. PRism, 6(2), 19. http://www.prismjournal.org/index.php?id=index
Hassan, A. K., & Islam, M. R. (2005). Temporal causality and dynamics of financial development, trade openness, and economic growth in Vector Auto Regression (VAR) for Bangladesh, 1974-2003: Implication for poverty reduction. Journal of Nepalese Business Studies, 2(1), 1–12. https://doi.org/10.3126/jnbs.v2i1.50
Imbs, J. (2007). Growth and volatility. Journal of Monetary Economics, 54(7), 1848–1862. https://doi.org/10. 1016/j.jmoneco.2006.08.001
Inklaar, R., O’Mahony, M. & M. P. Timmer. (2005). ICT and Europe’s productivity performance, industry-level growth account comparisons with the United States. Review of Income and Wealth, 51(4), 505-536.
Ishida, H. (2015). The effect of ICT development on economic growth and energy consumption in Japan. Telematics and Informatics, 32(1), 79–88. https://doi.org/10.1016/j.tele.2014.04.003
ITU (2018). Measuring the information society report 2018. Retrieved from https://www.itu.int/en/ITU-D/Statistics/Pages/publications/misr2018.aspx
ITU. (2021). Connectivity in the least developed countries: Status report 2021. A joint publication by the International Telecommunication Union (ITU) and the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS).
Jorgenson, D. W. (2001). Information technology and the US economy. American Economic Review, 91(1), 1–32. https://doi.org/10.1257/aer.91.1.1
Koutroumpis, P. (2009). The economic impact of broadband on growth: A simultaneous approach. Telecommunications Policy, 33(9), 471–485. https://doi.org/10.1016/j.telpol.2009.07.004
Kroft, K., & Lloyd-Ellis, H. (2002). Further cross-country evidence on the link between growth, volatility and business cycles. Queens University, Department of Economic, Working Paper.
Lee, S. H., Levendis, J., & Gutierrez, L. (2012). Telecommunications and economic growth: An empirical analysis of sub-Saharan Africa. Applied Economics, 44(4), 461–469. https://doi.org/10.1080/00036846.2010.508730
Lee, S.-Y. T., Gholami, R., & Tong, T. Y. (2005). Time series analysis in the assessment of ICT impact at the aggregate level–lessons and implications for the new economy. Information & Management, 42(7), 1009–1022. https://doi.org/10.1016/j.im.2004.11.005
Myovella G., Karacuka M., & Haucap J. (2020). Digitalization and economic growth: a comparative analysis of Sub-Saharan Africa and OECD economies. Telecommun. Pol., 44(2), 101856. https://doi.org/10.1016/j.telpol.2019.101856
Nasab, E. H., & Aghaei, M. (2009). The effect of ICT on economic growth: Further evidence. International Bulletin of Business Administration, 5(2), 46–56.
Nguyen, T. P., Dinh, T. T. H., Tran Ngoc, T., & Duong Thi Thuy, T. (2022). Impact of ICT diffusion on the interaction of growth and its volatility: Evidence from cross-country analysis. Cogent Business & Management, 9(1), 2054530. https://doi.org/10.1080/23311975.2022.2054530
Nguyen, T. P., Dinh, T. T. H., Tran Ngoc, T., & Duong Thi Thuy, T. (2022). Impact of ICT diffusion on the interaction of growth and its volatility: Evidence from cross-country analysis. Cogent Business & Management, 9(1), 2054530.
Niebel, T. (2018). ICT and economic growth – Comparing developing, emerging and developed countries. World Development, 104, 197–211. https://doi.org/10. 1016/j.worlddev.2017.11.024
Okogun, O. A. (2012). Economic Value of ICT Investment in Nigeria: Is it commensurate? . International Journal of Economics and Management Sciences, 1(10), 20-28.
Pohjola, M. (2001). Information Technology, Productivity and Economic Growth: International Evidence and Implications for Economic Growth. Oxford University Press.
Pohjola, M. (2002). The new economy: Facts, impacts and policies. Information Economics and Policy, 14(2), 133–144. https://doi.org/10.1016/S0167-6245(01)00063-4
Pradhan, R. P., Mallik, G., & Bagchi, T. P. (2018). Information communication technology (ICT) infrastructure and economic growth: A causality evinced by cross-country panel data. IIMB Management Review, 30(1), 91-103.
Ramey, G., & Ramey, V. A. (1995). Cross-country evidence on the link between volatility and growth. The American Economic Review, 85(5), 1138–1151 https://www.nber.org/papers/w4959
Roller, L.-H., & Waverman, L. (2001). Telecommunications infrastructure and economic development: A simultaneous approach. American Economic Review, 91(4), 909–923. https://doi.org/10.1257/aer.91.4.909
Sassi, S., & Goaied, M. (2013). Financial development, ICT diffusion and economic growth: Lessons from MENA region. Telecommunications Policy, 37(4–5), 252–261. https://doi.org/10.1016/j.telpol.2012.12.004
Skorupinska, A., & Torrent-Sellens, J. (2015). The role of ICT in the productivity of Central and Eastern European countries: cross-country comparison. Revista de Economía Mundial, 39, 201-221.
Solomon, E. M., & van Klyton, A. (2020). The impact of digital technology usage on economic growth in Africa. Utilities Policy, 67, 101104.
Stanley, T. D., Doucouliagos, H., & Steel, P. (2018). Does ICT generate economic growth? A meta-regression analysis. Journal of Economic Surveys, 32(3), 705–726. https://doi.org/10.1111/joes.12211
Tang, S. H. K. (2002). The link between growth volatility and technical progress: Cross-country evidence. Economics Letters, 77(3), 335–341. https://doi.org/10.1016/S01651765(02)00145-3
Temple, J. (1998). Initial Conditions, Social Capital and Growth in Africa. Journal of African Economies, 7, 309-347.
Timmer, M. P. & van Arky, B. (2005). Does information and communication technology drive EU-US productivity growth differentials? Oxford Economic Papers, 57(2005), 693–716. https://doi.org/10.1093/oep/gpi032
Venturini, F. (2009). The long-run impact of ICT. Empirical Economics, 37(3), 497–515. https://doi.org/10.1007/s00181-008-0243-9
Vu, K. M. (2011). ICT as a source of economic growth in the information age: Empirical evidence from the 1996–2005 period. Telecommunications Policy, 35(4), 357–372. https://doi.org/10.1016/j.telpol.2011.02.008
Vu, K., Hanafizadeh, P., & Bohlin, E. (2020). ICT as a driver of economic growth: A survey of the literature and directions for future research. Telecommunications Policy, 44(2), 101922. https://doi.org/10.1016/j.telpol. 2020.101922
Waverman, L., Meschi, M., & Fuss, M. (2005). The Impact of Telecoms on Economic Growth in Developing Countries. The Vodafone Policy Paper Series, 2(03), 10-24.
Yousefi, A. (2011). The impact of information and communication technology on economic growth: Evidence from developed and developing countries. Economics of Innovation and New Technology, 20(6), 581–596. https://doi.org/10.1080/10438599.2010. 544470
Zarnowitz, V. & Moore, G. (1986). Major changes in cyclical behaviour. In R. Gordon (Ed.), The American Business Cycle: Continuity and Change. Chicago, University of Chicago Press.
Published
2023-07-03
How to Cite
Bouhari, M., & Mathlouthi, Y. (2023). Impact of ICT Diffusion on the Economic Growth and Its Volatility: A Case Study on African and MENA Countries . European Journal of Science, Innovation and Technology, 3(3), 321-342. Retrieved from https://ejsit-journal.com/index.php/ejsit/article/view/222
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