An analysis of total factor productivity and its determinants in Malta

Abstract

The objective of this dissertation is to perform an empirical analysis of Total Factor Productivity and its possible determinants in Malta. Utilising the knowledge obtained from a review of the economic literature covering Total Factor Productivity and its determinants, and a qualitative analysis of historical data, this study will quantitatively analyse the impact of several macroeconomic variables on Total Factor Productivity. A time-series for Total Factor Productivity will be constructed using the standard Growth Accounting Methodology, while the determinants of Total Factor Productivity will be estimated using the Ordinary Least Squares Methodology, utilising annual data from 1971 to 2013. Meeting a priori expectations, the growth accounting exercise results show Total Factor Productivity in Malta to be of a cyclical nature, matching findings of previous empirical studies. The main conclusion of this study is that the main determinants of Total Factor Productivity in Malta are Inflation, Exchange Rate movements, Trade Openness and European Union accession.