Applying panel generalized least square (GLS) analysis to data collected from the Total Economy Database – The Conference Board, (TED-1 and TED-2, Byrane and Corrado, 2016), we investigate the driving forces in the growth of TFP. Due to data availability, we extracted TFP and ICT and non-ICT annual growth data from TED-2 for 1981 to 2015, covering most developed and developing nations. We found that the impact of ICT growth on total factor productivity (TFP) is uneven for more financially open and less financially open countries. The impact of ICT growth on TFP growth is more important in financial open economies, but ICT growth is somewhat negligible for TFP growth in less financially open countries. Trade openness had a positive impact on TFP growth for all countries. Financial openness can be measured both de facto and de jure. External liabilities have exhibited a positive impact on TFP growth but not on external assets.
Saturday, 30 March 2019: 9:20 AM
The slowdown in total factor productivity (TFP) growth in developed countries started in 2005, a few years before the Great Recession in 2008. This sizeable decline in TFP has attracted a great deal of concern. Due to the superb marginal contribution to reallocating resources and improving management by information and communication technology (ICT) in the 1990s, Fernald (2014) refers to the reversal phenomenon of TFP growth since 2005 as “back to the normal pace.” Despite this downturn in TFP growth, researchers have suggested that financial openness may result in a positive impact on TFP growth (Kose et al, 2009; Bekaert et al, 2010).