The Causal Relationship between Patent Growth and Growth of GDP with Quarterly Data in the G7 Countries: Cointegration, ARDL and Error Correction Models

20 Pages Posted: 5 Sep 2011

See all articles by Dushko Josheski

Dushko Josheski

University Goce Delcev

Cane Koteski

University Goce Delcev

Date Written: September 3, 2011

Abstract

This empirical study investigates the dynamic link between patent growth and GDP growth in G7 economies. ARDL model showed that there exist positive relationship in long run between quarterly growth of patents and quarterly GDP growth. The error correction term suggests that 20,6 percent of the adjustment back to long run equilibrium of industrial production in G7 countries is corrected by 20,6% a year, following a shock like the one in 1974 , which in our study is controlled by a dummy variable D74. In the short run however at one or two lags there exist negative relationship between quarterly patents growth and quarterly growth of GDP. Johansen’s procedure for cointegration showed that long run multipliers are positive between the patent growth and GDP growth in G7 economies. Granger causality test showed that patent growth Granger cause GDP growth in G7 countries. Unrestricted VAR showed that there exists positive relationship between patent growth and GDP growth at two or three lags.

Keywords: Cointegration, ARDL, Error correction models, Johasens’s procedure, Patent growth, GDP growth

JEL Classification: C22, O31,

Suggested Citation

Josheski, Dushko and Koteski, Cane, The Causal Relationship between Patent Growth and Growth of GDP with Quarterly Data in the G7 Countries: Cointegration, ARDL and Error Correction Models (September 3, 2011). Available at SSRN: https://ssrn.com/abstract=1921908 or http://dx.doi.org/10.2139/ssrn.1921908

Dushko Josheski (Contact Author)

University Goce Delcev ( email )

Stip
Macedonia
+389 32 550 000 (Phone)
+389 32 390 700 (Fax)

HOME PAGE: http://www.ugd.edu.mk/

Cane Koteski

University Goce Delcev ( email )

PO box 201
Stip, 2000
Macedonia

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