The long-run impact of Information and Communication Technology on economic output: The case of Australia

• Cointegration relationship exists between GDP and ICT capital and other factors of production.
• Evidence of bidirectional causality between GDP and ICT capital.
• ICT makes a significant and positive contribution to economic output in both the short and long run.
• ICT capital Granger causes multifactor productivity.

This paper investigates the cointegration and causal relationships between Information and Communication Technology (ICT) and economic output in Australia using data for about five decades. The framework used in this paper is the single-sector aggregate production function, which is the first comprehensive approach of this kind to include ICT and non-ICT capital and other factors to examine long-run Granger causality. The empirical evidence points to a cointegration relationship between ICT capital and output, and implies that ICT capital Granger causes economic output and multifactor productivity, as does non-ICT capital.