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Journal of the Knowledge Economy

, Volume 10, Issue 1, pp 35–58 | Cite as

Causality Nexus between Economic Growth, Inflation and Innovation

  • Trabelsi RamziEmail author
  • Jouini Wiem
Article
  • 187 Downloads

Abstract

This paper uses the panel vector error-correction model to explore the Granger-causality relationships between inflation, innovation and economic growth. This study covers 25 countries classified according to their firms’ extent of capacity for innovation between 1990 and 2014. The econometric analysis gave various images and very interesting results concerning the causality links between the variables in the short and long run, especially between the inflation and the two measures of innovation. Including two different innovation indicators offers a rich menu of possible causal patterns. We found that the innovation productivity is more responsive to the inflation in the most innovative countries. However, the innovation funding is more sensitive to the inflation in the less innovative countries. The originality of this study stems from three aspects: First, two measures of innovation are considered—innovation funding and innovation productivity. Second, the causality nature between the inflation and the innovation is not revealed yet in the literature. Third, using panel VEC model to discover the causality link between more than two variables in the short and long run and for two samples is an important contribution and a complicated method.

Keywords

Economic growth Inflation Innovation Granger-causality Panel VECM 

JEL Classification

O30 O43 E31 C33 

Notes

Acknowledgements

I would like to thank Professor Akri ben Salah, Professor Mohamed ben Mimoun, and Professor Hedi Zawchi for their valuable and helpful suggestions.

Compliance with Ethical Standards

Funding Information

The authors are the only source of funding for this paper.

Ethics

This article is original and contains unpublished materials. The corresponding author confirms that there are no ethical issues involved.

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.High Business School of Tunis, Ecole Supérieure de Commerce de Tunis ESCTUniversité de ManoubaNabeulTunisia
  2. 2.Ecole Nationale d’Administration de Tunis, ENATunisTunisia
  3. 3.Higher Institute of Management of Tunis ISGTUniversity of TunisTunisTunisia

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