This paper analyses the causal relationship between institutional quality and economic growth to investigate whether institutional quality is the outcome or the cause of economic growth in Sub-Saharan Africa. It uses annual panel data of 27 countries for...
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This paper analyses the causal relationship between institutional quality and economic growth to investigate whether institutional quality is the outcome or the cause of economic growth in Sub-Saharan Africa. It uses annual panel data of 27 countries for the period spanning 1996 to 2014 by employing Pedroni panel co-integration, Wald panel causality, and the system GMM techniques. The co-integration test results show that there is a long-run relationship between institutional quality and economic growth. Also, the causality test results show a unidirectional causality from economic growth to institutional quality but not the other way round. Furthermore, the study found that institutional quality, trade openness, financial development, and debt positively affect economic growth. Also, economic growth and freedom are found to be important determinants of institutional quality. However, debt servicing and dependence on natural resources negatively affect economic growth and institutional
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