The Cointegration Relationship and Causal Link of Internet Penetration and Broadband Subscription on Economic Growth: Evidence from ASEAN Countries

Abstract

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.