Services Sector Led Growth Hypothesis, A Fractionally Integrated Heterogeneous Panel Data Analysis for G20 Countries

This research aims to examine the nexus between the services sector value-added and economic growth using a fractionally integrated heterogeneous panel data analysis for a selected sample of G20 countries from 1999 to 2022. This study considers variables such as service sector value-added, trade in services, foreign direct investment, gross fixed capital formation, and research and development expenditure. The findings reveal a significant positive relationship between service sector value-added and economic performance, underscoring its critical role in driving growth in modern economies. Additionally, the research highlights the negative impacts of external shocks, such as the COVID-19 pandemic and the 2008 financial recession, which stress the need for resilience within the service sector. These results indicate that targeted investments and supportive regulatory frameworks are essential for enhancing competitiveness, fostering innovation, and promoting sustainable practices.