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Is it worthwhile to study competitiveness indices? evidence from the causal relationship between global competitiveness index and economic growth rate
Author(s)
Date Issued
2025
Publisher
Scientific and Business World
Citation
In Yeung, W. M., Woo, K. Y., Tang, C. H., Lau, H. M., Tsang, C. K., Li, S. K., Ho, T. Y., Au, W. K., & Wong, W. K. (Eds.). (2025). Causality and behavioral finance studies (pp. 54-80). Scientific and Business World.
Type
Book Chapter
Abstract
This paper justifies the use of competitiveness indices in empirical studies by
examining the causal relationship between the Global Competitiveness Index (GCI) and
economic growth rate. A competitiveness map is introduced to identify outperformers
of competitiveness and thus investment opportunities. Adopting panel Grangercausality test to examine the causal relationship between GCI and economic growth
rate in the period 2006-2015, this paper finds evidence of two-way causality between
GCI and economic growth rate of most countries in the world. Such causal relationship
breaks down in developing countries. It is explained by the effectiveness of resource
allocation mechanism to generate competitiveness. The paper further presents a
competitiveness map based on data envelopment analysis to analyze the effectiveness
in generating competitiveness. This information is used to identify best performing
countries based on competitiveness. The study supports the use of GCI to analyze the
business environment in different countries for making investment decisions. This
approach can be extended to test other existing competitiveness indices. The
competitiveness map illustrated in the paper provides an easy and effective screening
tool to identify outperformers in terms of competitiveness.
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