Governance and economic growth: evidence from South Asian countries

Abstract

This study is conducted to trace out the effect of governance on economic growth in seven South Asian countries. This study is completely secondary data-based and data have been collected from the website of the World Bank (WB). For analysis, econometric model namely, pooled regression, fixed effect and random effect models have been utilised along with Hausman test and extension of the model in this study. In analysis, governance indicators namely control of corruption, government effectiveness, voice and accountability, regulatory quality and rule of law are explanatory variables while macroeconomic indicators like, foreign direct investment (FDI), trade openness, remittance, capital formation, export and import are considered as independent variables. Gross domestic product (GDP) growth has been treated as dependent variable. The result shows that the change in government effectiveness and rule of law have positive impact on economic growth, where as, positive change in control of corruption and regulatory quality lead to negative change in economic growth. Furthermore, FDI and export are positively and import is negatively related to the economic growth of South Asian countries.