Institutional quality, financial development and sustainable economic growth among lower income countries

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Authors

Pradhan, Rudra Prakash
Nair, Mahendhiran Sanggaran
Arvin, Mak B.
Hall, J.H. (John Henry)

Journal Title

Journal ISSN

Volume Title

Publisher

Wiley

Abstract

This article postulates strong endogenous relationships in lower income countries between institutional quality, financial development and sustained economic growth. These associations were investigated using the vector-error correction model (VECM) and Granger causality method for a sample of 79 countries from 2005 to 2022. The findings show that (1) these variables reinforce each other in the short run. (2) In the long run, both institutional quality and financial development can fuel economic growth. (3) The positive effect of institutional quality on economic growth is greater than that of financial development. Policy implications of these findings are that careful attention should be paid to co-development policies to enhance the institutional quality and the financial system in these economies. Policies should also consider economic growth strategies to enable sustainable economic growth rates.

Description

DATA AVAILABILITY STATEMENT : Will be available upon request.

Keywords

Vector-error correction model (VECM), Economic growth, Lower income countries, Financial development, Institutional quality, SDG-08: Decent work and economic growth

Sustainable Development Goals

SDG-08:Decent work and economic growth

Citation

Pradhan, R. P., Nair, M. S., Arvin, M. B., & Hall, J. H. (2023). Institutional quality, financial development and sustainable economic growth among lower income countries. Natural Resources Forum, 47(3), 435–483. https://doi.org/10.1111/1477-8947.12291.