ICT Investment Impact on Human Capital Development through the Channel of Financial Development in Bangladesh: An Investigation of Quantile ARDL and Toda-Yamamoto Test

Abstract

The study aims to assess the causal effects of ICT investment, financial development, and human capital development in Bangladesh for the period 1990-2019. To do so, we applied liner ARDL, Quantile ARDL, and directional causality investigated by performing a non-granger causality test. The result of Quantile ARDL confirms long-run effects running from ICT investment and financial development to human capital development. Considering the result short-run estimation, study findings established a positive association between financial development and human capital development but both positive and negative observed in ICT investment on human capital development.  Furthermore, the nonlinear relationship established with the standard Wald test. Second, the results of directional causality test following Toda and Yamamoto (1995) proposed framework. Study findings established bidirectional causality running between financial development and human capital development and unidirectional causality running from ICT investment to human capital development. Therefore, it assumed that human capital development in Bangladesh critically relies on financial sector growth and development in the ICT sector. Furthermore, it is also observed that the bidirectional causal relationship also confirmed that is the development of either independent variables can influence each other.