Governance Quality And Economic Growth In The Caribbean In Times Of Covid-19

Abstract

ABSTRACT: The Caribbean region faces a daunting challenge as it confronts the COVID-19 pandemic. This study aims to shed light on the intricate relationship between governance quality and the economic performance of Caribbean nations, especially in the context of a global health crisis. Our research method involves a panel-random effects model, which captures the effects of governance quality and the COVID-19 pandemic on economic growth. We utilize data from various Caribbean countries, considering six dimensions of governance quality, trade openness, inflation, investment, and human capital. This comprehensive approach ensures a nuanced understanding of the region’s economic landscape during these turbulent times. Our findings expose a significant negative association between the various dimensions of governance and the ongoing pandemic crisis. Specifically, governance indicators such as voice and accountability, rule of law, political stability, and absence of violence, along with government effectiveness, emerge as positive catalysts for economic growth. On the contrary, the control of corruption and regulatory quality demonstrate a notable negative impact on growth. Furthermore, our research unveils that investment and human capital significantly contribute to boosting output growth in the Caribbean. Conversely, the impact of the COVID-19 pandemic, inflation, and trade openness is observed to be detrimental to economic growth. These findings corroborate existing empirical evidence on the governance-growth nexus, underscoring the complex interplay between governance and economic development. These results emphasize the urgency of long-term strategies to enhance governance quality in Caribbean countries. It is imperative to bolster the capacity of governments to address future epidemic episodes, recognizing the persistent threat of pandemics. Policymakers should prioritize measures that promote voice and accountability, rule of law, political stability, and government effectiveness while addressing corruption and regulatory quality issues. This research holds profound significance for both academics and policymakers, offering a pathway to stable and sustainable long-term economic growth and calling for proactive preparedness in the face of future global health challenges. It also invites further research in this critical area.