Technological Innovation, Infrastructure and Industrial Growth in Bangladesh: Empirical Evidence from ARDL and Granger Causality Approach

Abstract

In this study, we examined the empirical cointegration, long and short-run dynamics and relationships between technological innovation, infrastructure and industrial growth in Bangladesh over the period of 1974–2016. The ARDL Bounds Test methodology and Granger Causality test in an augmented VECM framework were applied. The ARDL bounds tests and additional cross-checking tests, undoubtedly confirmed long run as well as short-run cointegration between the three variables in Bangladesh. The obtained results expressed that infrastructure has a positive impact on the industrial growth but technological innovation has a negative impact on it in the long run. In the short run, infrastructure and technological innovation both have a positive and significant impact on industrial growth. The VECM Granger causality test reveals the existence of a bi-directional causality running between Industrial growth and infrastructure; and infrastructure and technological innovation. On the other hand, unidirectional causality is running from industrial growth to technological innovation. The findings of the Granger causality test supports the results obtained in the ARDL approach in our study. The results obtained from this empirical analysis have an important policy implication for a developing country like Bangladesh as well as other developing countries.