The Causal Relationship between Institutions and Economic Growth: An Empirical Investigation for Pakistan Economy

Siddiqui, Danish Ahmed and Ahmed, Qazi Masood (2009): The Causal Relationship between Institutions and Economic Growth: An Empirical Investigation for Pakistan Economy.

Abstract

This paper investigates relationship between institutional quality and economic performance in Pakistan using the Johansen-Juselius cointegration technique and the Granger causality test. The study results indicate that Institutions and growth are cointegrated and thus exhibit a reliable long run relationship. The Granger causality test findings indicate that the causality between Institutions and growth is uni-directional. However, there is no short run causality from Institutions to growth and vice versa. Therefore, as a policy implication that institutional quality may cause to the sustainable increase in country’s income in the long run, and success of any policy could be influenced by the soundness of institutions.

• Item Type: MPRA Paper
• Language: English
• Keywords: institutions; social capital; growth; cointegration; index;granger; error correction; Johansen; pakistan
• Subjects: Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth; P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy ; Legal Institutions ; Property Rights ; Natural Resources ; Energy ; Environment ; Regional Studies; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification

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