Information technology, financial deepening and economic growth: Some evidence from a fast growing emerging economy

Ali F. Darrat^1* and Saif S. Al-Sowaidi²

¹College of Business, Louisiana Tech University, Ruston, LA , 71272, U.S.A.

²College of Business and Economics, University of Qatar, Doha, Qatar.

*Corresponding author. E-mail: darrat@cab.latech.edu.

Tel: (318) 257-3874

Accepted 10 November, 2009

   Abstract

We empirically assess the role of information technology and financial deepening in Qatar’s fast growing economy. Our analysis follows the vector-error-correction modeling technique that is capable of exploring long-run relations and short-run causal dynamics. We further investigate the common permanent components of the cointegrating system to identify the main driving forces. Consistent with some theoretical priors, the results suggest that real economic growth in Qatar is robustly linked over the long-run to both financial deepening and information technology (defined alternatively). The results further indicate that IT is relatively more important than financial development for propelling long-run growth. However, we find financial development, rather than IT, to be more critical for enhancing economic growth over the short-run horizon.

Key words:  Economic growth, financial deepening, information technology, VECM.