Journal of Economics and Business
ISSN 2615-3726 (Online)
ISSN 2621-5667 (Print)
Published: 13 January 2020
The Cointegration Relationship and Causal Link of Internet Penetration and Broadband Subscription on Economic Growth: Evidence from ASEAN Countries
Aileen L. Camba, Abraham C. Camba, Jr.
Polytechnic University of the Philippines
Download Full-Text Pdf
Keywords: ASEAN, Broadband Subscription, Causality, Economic Growth, Internet Penetration, Panel Cointegration
This study explores the cointegration relationship and causal link of internet penetration and broadband subscription to economic growth from the 10 countries of ASEAN for the period 2000-2016. A pooled multiple regression model with GDP growth as a function of internet penetration and broadband subscription was developed. The Johansen-Fisher panel cointegration was applied to determine the presence of a long-run equilibrium relationship among the three variables and the direction of causality was identified by estimating the panel-based vector error correction model (VECM). Results from cointegration test indicate a long run equilibrium relationship between internet penetration, broadband subscription and economic growth. The causality test reveals there is long run causality running from internet penetration and broadband subscription to economic growth. In the short-run, broadband subscription causes economic growth in the ASEAN countries. However, internet penetration has no causal link with economic growth in the short-run during the period 2000-2016. The findings are supportive of the claim that internet penetration and broadband connections are engine of economic growth and are rapidly transforming ASEAN economies. Based on these findings, this study recommends that ASEAN governments should be supportive on policies that promotes better internet and broadband infrastructure to achieved short and long-run economic growth.
- Benhabib, J. & Spiegel, M. (2005). Human Capital and Technology Diffusion. In: Handbook of Economic Growth, Volume 1A, P. Aghion and S.N. Durlauf (eds.), 935-966. Amsterdam: Elsevier.
- Bowles, M. (2012). Digital Economy and Regional Futures: ICT Future Foresight. Innovation and Business Skills Australia: Melbourne.
- Bowles, M. & Wilson P. (2010). The Impact of the Digital Economy and the NBN on skills. Innovation and Business Skills Australia: Melbourne.
- Choi, C. & Yi, M.H. (2009). The effect of the Internet on economic growth: Evidence from cross-country panel data. Economics Letters, 105(1), 39-41.
- Demetriades, P. & Fielding, D. (2012). Information, institutions, and banking sector development in West Africa. Economic Inquiry, 50(3), 739-753. https://dx.doi: 10.1111/j.1465-7295.2011.00376.x.
- Doong, S. & Ho, S. (2012). The impact of ICT development on the global digital divide. Electronic Commerce Research Applications, 11(5), 518-533. http://doi:10.1016/j.elerap.2012.02.002
- Dwivedi, Y.K., Alsudairi, M.A., & Irani, Z. (2010). Explaining factors influencing the consumer adoption of broadband. International Journal of Business Information Systems, 5(4), 393-417.
- Elgin, C. (2013). Internet Usage and the shadow economy: Evidence from panel data. Economic Systems, 37(1), 111-121. http://doi:10.1016/j.ecosys.2012.08.005
- Holt, L. & Jamison, M. (2009). Broadband and contributions to economic growth: Lessons from the US experience. Telecommunications Policy, 33, 575–581. article/pii/S0308596109000962
- Im, K.S., Pesaran, M.H. & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of econometrics, 115(1), 53-74.
- Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of economic dynamics and control, 12(2-3), 231-254.
- Kao, C. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of econometrics, 90(1), 1-44.
- Kelly, T., Liaplina, A., Tan, S., & Winkler, H. (2017). Reaping Digital Dividends: Leveraging the Internet for Development in Europe and Central Asia.
- Levin, A., Lin, C-F., & Chu, C-S. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of econometrics, 108(1), 1-24.
- Maddala, G.S. & Kim, I.-M. (1998). Unit roots, cointegration, and structural change. Cambridge: Cambridge University Press.
- Maddala, G.S. & Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bulletin of Economics and statistics, 61(S1), 631-652.
- Noh, Y. H. & Yoo, K. (2008). Internet, inequality and growth. Journal of Policy Modeling, 30(6), 1005-1016.
- Pedroni, P. (2004). Panel cointegration: asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Econometric theory, 20(3), 597-625.
- Shahiduzzaman, Md. & Alam, K. (2013). Information technology and its changing roles to economic growth and productivity in Australia. Telecommunications Policy, 38(2), 125-135. http:// dx.doi.org/10.1016/j.telpol2013.07.003
- World Bank (2016). World Development Report 2016: Digital Dividends. https://openknowledge. worldbank.org/bitstream/handle/10986/23347/9781464806711.pdf
- Zhang, T. (2013). Income disparity and digital divide: The Internet Consumption Model and cross-country empirical research. Telecommunications Policy, 37(6), 515-529. http://doi: 10.1016/j.telpol.2012.12.011