Economic Modelling on Economic Growth and International Trade in G20 Countries: The role of Digital Economy
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Abstract
This paper analyses the role of the digital economy plays in international trade impacts on economic growth of G20 countries from 2000-2020. The panel data of G20 countries is used to investigate the impact and data is collected from World Development Indicators. The results are estimated by pooled ordinary least square (PLOS) method, random and fixed effects, and the Generalized method of moments (GMM) model. Further, the econometric model is based on the Solow model that represents the relationship between economic growth (dependent variable) and other independent variables such as technology, labor, capital etc. The findings showed that 1) international trade only has positive effects on economic growth of G20 countries when interacted with the digital economy in the pooled OLS estimation, 2) the elasticities of labor and capital have negative and positive impacts on economic growth of G20 countries, 3) international trade has a significant impact on economic prosperity without and with interactive term in the random effect model, fixed effect model and GMM model.
The findings imply that international trade when interacting with the digital economy positively contributes to the economic growth of high-income and upper-middle-income G20 countries, although it shows a significant negative impact on the economic growth of low and lower-middle-income G20 countries. This may be because of lack of access to digital infrastructure in low-income countries. The study recommends that focused efforts are required towards developing and implementing the digital economy in G20 countries to ensure international trade’s full economic impact in economic growth of G20 countries.