The impact of telecommunication growth on the service sector: a cointegration analysis

Abstract

Using annual time series data of Sri Lanka this study examines the impact of telecommunication sector growth on the service sector growth. The methodology employed consists of the bivariate and multivariate cointegration approach to establish the long run equilibrium relationship and causality testing is employed to detect the direction of this relationship. The current study is the first of its kind to use annual secondary data to examine the long run relationship between telecommunications sector and service sector in Sri Lanka. I find statistical evidence for a positive long run equilibrium relationship between telecommunication sector growth and service sector growth which confirmed the research hypothesis. Finally, the possibility of one-way link between telecommunications sector growth and service sector growth was established through causality test. Based on these finding the current study emphasizes the need to target long term growth strategies in the telecommunication service sector for Sri Lanka.