Empirical Study on the Dynamic Interaction between China's Digital Industry Development and Economic Growth: Evidence from Panel Data Using the EWM-PVAR Approach

Abstract

This research explores the mutual influence between China's digital industry expansion and its economic growth, employing an EWM-PVAR model based on panel data analysis. The rapid growth of China's digital economy significantly impacts global resource allocation and reshapes industrial structures, driving national economic development. Utilizing datasets sourced from the National Bureau of Statistics of China and the China Urban Statistical Yearbook, the study evaluates digital industry development through eight indicators, including telecommunications volume, internet penetration, and IT sector employment. Analytical methods include the ADF unit root test, Johansen cointegration test, and Granger causality test to investigate the dynamics between digital industry development (LNDID) and economic growth (LNGDP). Results indicate a notable bidirectional causality between digital industry development and economic growth. Further analysis using impulse response functions demonstrates that the digital industry's short-term effect on economic growth is significantly positive, though this impact diminishes and ultimately reverses into a negative influence in the long run. Variance decomposition reveals a declining explanatory capacity of digital industry growth on overall economic performance over time, whereas the economic growth itself progressively gains a stronger explanatory role. The findings emphasize the interdependent relationship between digital industry development and economic growth, highlighting the necessity for coordinated strategies to achieve sustainable economic advancement.