Volume 18, No. 3, 2021
Granger Causality Between Economic Growth And Governance In The MENA Region: A Panel Data Approach
Nadia Farjallah , Asma Sghaier
Abstract
This study examines the causal relationship between institutions and economic development using a panel Granger causality test. The empirical results based on 24 countries show that there is a bi-directional causality between institutions and economic development. The findings also suggest that causality patterns between institutions and economic performance vary at different stages of income level. Better institutional quality fosters economic development in higher income countries, whereas economic development tends to enhance institutional quality in lower income countries. Determining cointgration is essential to understand the long-term equilibrium between economic variables. The purpose of this paper is to determine the nature of the relationship between economic growth and governance quality (corruption, democracy and political stability) in the MENA region during the 1984-2019 period. The results point to a two-way relationship between governance quality and economic growth.
Pages: 351-374
Keywords: Growth; Granger causality; Corruption; Democracy; Political stability.