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The Stability of Sustainable Development Path and Institutions: Evidence from Genuine Savings Indicators

Sato, Masayuki and Samreth, Sovannroeun and Sasaki, Kengo (2013): The Stability of Sustainable Development Path and Institutions: Evidence from Genuine Savings Indicators.

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Abstract

This paper investigates institutional factors affecting the performance of genuine savings (GS), which is often used in assessing sustainable development, adopting a model of autoregressive conditional heteroscedasticity in mean. We pay particular attention to the contribution of institutions to decrease the volaticility level of the GS path. Using GS data from the World Bank’s World Development Indicators, and institutional data in the International Country Risk Guide, the estimation results show that there are two ways, through which institutions affecting GS performance. First, the high quality of the institutions enhance GS level directly. Second, the high quality of institutions enhance the GS level via stabilizing the volatiligy of the GS path. Considering both effect in their totality, institutional improvement plays an important role in realizing a sustainable development path.

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