Economic Institutions and Growth Nexus: The Role of Governance and Democratic Institutions—Evidence from Time Varying Parameters’ (TVPs) Models

Ghulam Murtaza, Muhammad Zahir Faridi


The present study has investigated the channels through which
the linkage between economic institutions and growth is gauged, by
addressing the main hypothesis of the study that whether quality of
governance and democratic institutions set a stage for economic
institutions to promote the long-term growth process in Pakistan. To
test the hypothesis empirically, our study models the dynamic
relationship between growth and economic institutions in a time varying
framework in order to capture institutional developments and structural
changes occurred in the economy of Pakistan over the years. Study
articulates that, along with some customary specifics, the quality of
government and democracy are the substantial factors that affect
institutional quality and ultimately cause to promote growth in
Pakistan. JEL Classification: O40; P16; C14; H10 Keywords: Economic
Institutions, Growth, Governance and Democracy, Rolling Window Two-stage
Least Squares, Pakistan

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