Innovation, Finance, and Economic Growth in OECD Countries: New Insights from a Panel Causality Approach

Abstract

In this paper, using a panel causality approach, we examine endogenous connections between financial development, innovation, and economic growth in OECD countries for the period 1961–2018. The empirical results of our study show that financial development and innovation support long-run economic growth and that the short-run dynamics facet the multifarious interconnections between financial development, innovation, and economic growth. The strategic insight drawn from this research is that to ensure sustainable economic growth, policy-makers in the OECD countries must pay attention to establishing an integrated structure that looks into co-improvement policies concerning the activities that enhance financial development, innovation, and economic growth.