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Does Domestic Investment Produce Economic Growth in Canada: Empirical Analysis Based on Correlation, Cointegration and Causality

Bakari, Sayef (2016): Does Domestic Investment Produce Economic Growth in Canada: Empirical Analysis Based on Correlation, Cointegration and Causality.

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Abstract

This paper investigates the relationship between domestic investment and economic growth in Canada. In order to achieve this purpose, annual data for the periods between 1990 and 2015 was tested by using Correlation analysis, Johansen co-integration analysis of Vector Error Correction Model and the Granger-Causality tests. According to the result of the analysis, it was determined that there is no relationship between the four variables in the long run term, however, there is a weak relationship between domestic investment and economic growth in the short run term. On the other hand, the results of the Granger Causality test show that there is no causal relationship between domestic investment and economic growth. The result provide that domestic investment affects economic growth on the short run term, however the domestic investment does not cause economic growth in Canada.

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