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Do International Capital Flows, Institutional Quality Matter for Innovation Output: The Mediating Role of Economic Policy Uncertainty

Md Qamruzzaman (), Tahar Tayachi (), Ahmed Muneeb Mehta () and Majid Ali ()
Additional contact information
Md Qamruzzaman: School of Business and Economics, United International University, Dhaka 1212, Bangladesh
Tahar Tayachi: Finance Department, Effat College of Business, Effat University, Jeddah 21478, Saudi Arabia
Ahmed Muneeb Mehta: Hailey College of Banking and Finance (HCBF), University of the Punjab, Lahore 54000, Pakistan
Majid Ali: Hailey College of Commerce (HCC), University of the Punjab, Lahore 54000, Pakistan

JOItmC, 2021, vol. 7, issue 2, 1-26

Abstract: The determinants of innovation output in empirical literature were extensively investigated by considering diverse sets of variables. Still, the impact of economic policy uncertainty on innovation output is yet to unleash. To mitigate the existing research gap, the study investigated the association between EPU and innovation output, considering a panel of 22 countries over 1997–2018. The study employed a dynamic panel quantile regression and system-GMM specification causality test for discovering elasticity and directional association both in the long-run and the short-run. Study findings disclosed negative statistically significant effects running from EPU to innovation output except innovation measured by R&D. Moreover, institutional quality and FDI exposed positive and statistically significant association with innovation output. In terms of directional causality, unidirectional causality running from EPU and FDI to innovation output was established, whereas bidirectional causality was established between institutional quality and innovation output.

Keywords: innovation output; open innovation; economic policy uncertainty; institutional quality; dynamic panel quantile regression (search for similar items in EconPapers)
JEL-codes: M (search for similar items in EconPapers)
Date: 2021
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