The effects of unemployment and inflation rates on the business value of information technology and economic performance: The partial adjustment valuation approaches

Abstract

Equipped with the one-equation theory of partial adjustment (PA) under the constant speeds of PA assumption (Nerlove, 1958) and the two-equation theory of PA under the dynamic and variable speeds of PA assumption (Lin & Kao, 2014), this paper applies the constant PA speeds (Lin et al., 2010) and dynamic PA speeds (Lin & Kao, 2014) PA valuation (PAV) approaches to analyze the grand research issue (for three research questions), namely, how IT and two important macroeconomic variables, unemployment rate and inflation rate, affect the country's performance jointly and separately from a global perspective. The ten research models are fitted into a panel data sample composed of 11 countries (Canada, France, the United Kingdom, the United States, Australia, Belgium, Denmark, Greece, Norway, Portugal, and Spain) over the period from 1993 to 2011. The results reveal that the IT productivity paradox remains in some developed countries; IT payoffs hinge on the exploitation of available complementary resources; and the complementarity and substitutability relationships between IT and unemployment and inflation rates exist.