The effects of Internet usage, financial development and trade openness on economic growth in South Africa: A time series analysis

This study estimates the effects of Internet usage, financial development and trade openness on economic growth using annual time series data for South Africa for the period 1991-2013. Structural unit root test and Johansen and ARDL cointegration tests are performed to examine the long run relationship amongst Internet usage, financial development, trade openness and economic growth. Findings from ARDL cointegration tests indicate a long-run relationship between the variables. Results from the ARDL estimates indicate a positive and significant long run relationship between Internet usage and economic growth in South Africa. Also, there is significant positive relationship between financial development and economic growth. However, the short run relationship among the variables was found to be insignificant. The robustness of the long-run relationship between the variables was checked by the application of dynamic ordinary least squares (DOLS) estimation. The Granger causality test reveals that both Internet usage and financial development Granger-cause economic growth in South Africa. This causal link is found to be robust from the application of impulse response and variance decomposition analysis. Based on these findings, this study recommends that the South African government continue with policies that aim to invest more resources into its Internet infrastructure to further expand its network and usage.