Abstract
The paper researched the causal relationship between institutional quality measures and real gross domestic product growth (GDP) on the South East European (SEE) countries in the period 1996-2016. To achieve the aim of this research the panel techniques (the Dumitrescu-Hurlin noncausality approach) were used. The SEE suffers from very poor control of corruption, as well as significant political instability, the weak rule of law and poor government effectiveness. Our results indicate that there is unidirectional homogeneous causality between political stability and real GDP growth. Control of corruption leads to government effectiveness. The rule of law leads to control of corruption, and government effectiveness to political stability. Additionally, there is a bidirectional homogeneous causality between the rule of law and political stability. Thus, the research found some empirical evidence that stronger institutional measures cause higher economic growth.
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