Relationship between Institutions and Economic Growth: A Cross Country-Time Series Analysis
International Journal of Economics and Empirical Research, Vol. 4(7), p. 362-375, 2016
14 Pages Posted: 6 Dec 2016
Date Written: December 3, 2016
Purpose: Relationship between institutions and economic growth is remain a controversial phenomena in case of SAARC countries (South Asian Association for Regional Cooperation). This article, recommends that the policy makers of these countries should make and implement such type of ‘institutions’ that are helpful to improve the economic growth of these countries.
Methodology: The panel data on Gross Domestic Product index (GDPI), Institutional Index (Ins), Labour Force (LF), Educational Index (Edu), Gross Fixed Capital Formation (Pk), Trade Openness (TO) and Gross Domestic Product Deflator (Inf) have been utilized over the period of 1995-96 to 2012-13.
Findings: The results of ‘Fixed Effects Estimation’ (FEM) has been confirmed the positive and statistically significant relation between institutions and economic growth in case of all sample countries. On the basis of empirical results, it is found that efficient institutions lead to a firm policy mechanism that is what basically required for economic growth. It is concluded that institutions are related with the process of economic growth through different indicators.
Recommendations: Therefore, the selected countries should do more efforts to develop and maintain a quality of institutional setup which ultimately leads to an increase in economic growth.
Keywords: Institutions, Economic Growth, SAARC
JEL Classification: O4, O43
Suggested Citation: Suggested Citation