Institutional quality,financial development and sustainable economic growth among lower income countries |
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| Authors: | Rudra P Pradhan Mahendhiran S Nair Mak B Arvin John H Hall |
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| Institution: | 1. Vinod Gupta School of Management, Indian Institute of Technology Kharagpur, Kharagpur, India;2. Sunway Institute for Global Strategy & Competitiveness, Sunway University Business School, Sunway University, Bandar Sunway, Malaysia;3. Department of Economics, Trent University, Peterborough, Ontario, Canada;4. Department of Financial Management, University of Pretoria, Pretoria, Republic of South Africa |
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| 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. |
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| Keywords: | economic growth financial development institutional quality lower income countries |
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