Institutional Quality and Economic Policy Strategies as Drivers of Competitiveness in African Economies

This study investigates the impact of financial development (FD) and green investments (GIs) on environmental pollution in Eastern and Southern African countries from 1990 to 2020. The research not only investigates the direct impacts of FD and green finance on environmental pollution but also examines the moderating role of institutional quality (IQ) and possible nonlinear effects of FD and green finance. Our analysis from the Panel autoregressive distributed lag (ARDL) long‐run PMG reveals a negative association between FD, green investment, and environmental pollution, indicating that a well‐developed financial sector supports sustainable initiatives, leading to improved environmental outcomes. IQ moderates this relationship, with strong governance enhancing the positive effects of FD and green finance on environmental preservation. Interestingly, the study identifies nonlinear impacts, suggesting that beyond a certain threshold, the contributions of FD and GIs to environmental preservation may diminish. Recognizing these nonlinearities and the role of IQ can inform more targeted policies for maximizing efforts toward environmental conservation in African economies.

This study investigated the statistical analysis of Corruption Perception Index (CPI) in Nigeria considering some other indices which are, Human Development Index (HDI), Global Peace Index (GPI) and Global Hunger Index (GHI). Data set was standardized using two different methods due to the different units and scales used in measuring the indices. Analyses were carried out on the two standardized data sets resulting in different covariance matrices but same correlation matrices, multiple and partial correlation coefficients. Hypothesis testing was carried out on both multiple and partial correlation coefficient at 5% level of significance. Result shows that a slight positive correlation exists between CPI and HDI, CPI and GHI (which implies that as CPI is increasing, HDI is also increasing, same for CPI and GHI) while a slight negative correlation exists between CPI and GPI (which implies a reverse). The partial correlation analysis carried out on the standardized data set indicates that a slight positive relationship exists between CPI and HDI holding GHI and GPI constant, a fair positive relationship exists between CPI and GHI holding HDI and GPI constant (which implies that without considering the effect of GPI, as CPI is decreasing, GHI and HDI are also decreasing) , a fair negative relationship exists between CPI and GPI holding HDI and GHI constant (without considering the effect of HDI and GHI, as CPI is decreasing, GPI is also decreasing) holding CPI constant a fair positive relationship exist between HDI and GHI(without considering the effect of CPI, as HDI is increasing, GHI is also increasing, a moderate positive relationship exists between HDI and GPI and a substantial positive correlation exists between GHI and GPI. Multiple correlation analyses were also carried out on the standardized data set which indicates a moderate positive relationship. Generally, CPI and HDI have dominant effect on the national economy.

PurposeThis study aimed to investigate the role of the country's institutional quality on the environmental, social and governance (ESG) performance of its companies.Design/methodology/approachOver a four-year period (2016–2019), the study examined the ESG performance of 412 organizations situated in 19 countries. ESG performance was the dependent variable, and the independent variables were rule of law, economic freedom, education index and international trade freedom. These factors described the institutional quality of countries in the authors’ study.FindingsThe findings reveal that institutional quality has a major impact on ESG performance. Companies engage in more ESG practices when they operate in countries with greater economic freedom and international trade freedom. The authors corroborated the core assumption of institutional theory (IT), which argues that organizational behavior is determined by the country's institutional setting.Research limitations/implicationsThe findings, like all research, should be interpreted with caution. The authors’ research focused solely on large energy corporations. As a result, the conclusions cannot be applied to small companies or other industries. ESG performance can also be measured using different datasets.Practical implicationsIf managers want their companies to perform better in terms of ESG, the authors recommend that they form a CSR committee and sign the Global Compact. This study may be valuable to international policymakers because they can underline that greater economic freedom, better education and greater international trade freedom all promote higher ESG performance.Originality/valueTo the best of the authors' knowledge, nearly all of research explores the relationship between ESG and financial performance. As a result, this study built on past research by investigating how national aspects affect corporate ESG performance.

The motivation of this study is to evaluate the role of environmental innovation, energy efficiency, and institutional quality in achieving sustainable environmental improvement in the G7 economy for the period 1980–2020. The study has implemented several econometrical tools for gauging their empirical association, including cross-sectional autoregressive distributed lag (ARDL) and directional causality with Dumitrescu-Hurlin. Study findings with cross-sectionally dependency test revealed that variables are sharing common dynamics, while the panel test of stationary documented all the variables were stationary after the first difference. Furthermore, the panel counteraction test established a long-run association among research variables. The variables coefficients with CS-ARDL revealed that renewable energy integration and environmental innovation expedite the scope of sustainability in the G7 economy in the long run. Furthermore, institutional quality assists in augmenting the process of ecological balance, that is, efficient institutional presence inductees affecting environmental policies implementation. Directional causality documented feedback hypothesis between renewable energy and environmental sustainability, environmental innovation and environmental sustainability. Moreover, the unidirectional causality was revealed between institutional quality and environmental sustainability. By considering the findings, a study has advocated that considerable time and efforts have to invest in formulating environmental policies to encourage clean energy integration for ensuring environmental quality and promoting environmental innovation.

This study investigates the impact of foreign aid and remittance inflows on entrepreneurship progress in Africa. The role of institutional quality in the relationship between foreign aid and entrepreneurship is also investigated. We explore data of 19 African countries for a period of 2006–2017, and panel data regression techniques are employed. The study finds that: (1) Foreign aid impact on entrepreneurship is negative. (2) The remittances mediate the negative impact of foreign aid on entrepreneurship. (3) Institutional quality mediates the negative impact of foreign aid on entrepreneurial progress. (4) The threshold level of remittance at which foreign aid would meaningfully enhance entrepreneurship is 10.59 as a percentage of GDP while that of institutional quality is 5.04 on a scale of 10 point. (5) The role of remittances and foreign aids is complementary in firm start-up activities. (6) Institutional quality plays important roles in moderating impact of foreign aid on firm start-up activities. In addition, our results show that concentration in banking industry does not benefit entrepreneurial activities. The study concludes that foreign aids and remittances perform complementary roles in improving the level of entrepreneurial development in Africa. The strong institutional environment is very important in promoting entrepreneurial success. These findings are robust to alternative estimations.

Studies have shown that external capital account liberalisation can boost capital inflows and augment economic development. Nevertheless, in the case of developing and emerging economies (DEE), adverse currency fluctuations could hamper external competitiveness due to relative price differences creating currency overvaluation, which might not be mitigated via financial openness alone. Therefore, this paper uses annual panel data for 35 DEEs over 40 years to explore whether financial openness of countries can help preserve their external price competitiveness, in the presence of greater trade openness and better institutional quality. Our findings suggest that financial openness alone does not aid export competitiveness, unless it is supported by greater trade openness. In addition, both cross country and regional analyses show that financial openness can benefit economies in maintaining their export competitiveness if they have stronger quality of institutions. Our results remain robust when we estimate the role of financial openness and institutional quality jointly on external competitiveness across regions, and during the pre‐ and post‐crisis periods. We conclude that financial openness alone is not sufficient to improve external competitiveness of an emerging economy, but it does help in the presence of greater trade openness or better institutions, enabling reduction in trade costs and thereby making these countries more price‐competitive.

The role of institutional quality and environment-related technologies in environmental degradation for BRICS

The impact of institutions and natural resources on economic growth have been examined by several researchers with little attention being paid on the impact of such variables on human capital development. Premised on the Sustainable Development Goals that targets sustained and inclusive growth and development measured in both macro and per capita terms, the study seeks to examine the impact of economic growth, institutional quality and natural resources on human development in 14 West African countries for the period from 2010 to 2021. Panel data estimation techniques were used in this study. Due to many economic variables (human Capital development and human development index) being dynamic, Arellano-Bond’s (GMM) dynamic panel-data analysis was justified and most appropriate. The dependent variable that is Human development was measured in two (human capital development and human development index) and hence two models under each were estimated. Results revealed that the lagged values of both human capital development index and human development index affect human capital development in west Africa positively. A negative and statistically significant relationship with human development (human capital index and human development index) was revealed on income from natural resources and real gross domestic product. Institutional variables like corruption control, political stability and government effectiveness were found to have positive and statistically significant relationships with human development indicators used in the study. By ensuring equitable distribution on wealth and natural resources rents, and enhancing institutional quality, human capital development in West African economies can be realised and sustainable development goals can be achieved. Governments should continue to control corruption, ensure political stability and government effectiveness.

Since the influential paper of [1], the issue relating to the conditions in recipient countries has become central in the foreign aid debate. Scholars and policymakers alike are interested in identifying the conditions which make foreign aid more effective. To contribute to this growing debate, this paper investigates the role of macroeconomic policy environment, institutional policy and a combination of these two previous variables in aid-growth relationship. The empirical analysis is based on a panel data set including 13 ECOWAS1 countries during the period from 1984 to 2010. Using a modified panel threshold model, the evidence strongly supports the view that the relationship between aid and economic growth is nonlinear with a unique threshold. The paper finds that a stable macroeconomic environment and better institutional quality are sine qua non for the effective contribution of aid to sustainable growth in ECOWAS countries. Furthermore, we find that institutional quality is an important determinant condition which allows aid affects economic growth. One of main contributions of this paper is to successfully identify the conditions under which the aid has a positive impact on economic growth. It is desirable to keep the combination condition in States II and IV (the macroeconomic policy environment is below or above and institutional quality above their threshold respectively) because it may be helpful for the achievement of sustainable economic growth. The results seem to indicate that bad institutional quality may have detrimental effects on economic growth. This will be an important result for the policymakers and international financial institutions, which increasingly favour conditionality and selectivity in the allocation of aid resources. The major policy implication of our results is not a call for a reduction of foreign aid but rather a call for rethinking strategies for international assistance and redesigning existing aid programs.

The impact of natural resource abundance on green economic growth in the belt and road countries: The role of institutional quality

Institutional Quality and Income Distribution

Growth and environment literature has gained much attention in recent times. However, the emphasis was laid on the conventional economic growth or gross domestic product at the expense of the category of growth that is evenly shared and whose social benefits are far reaching than just an increase in the overall economic pie. It is on this note that the present paper looks at the type of relationship between growth and environment with particular emphasis on growth that is all inclusive. Data are sourced from World Governance and Development Indicators (WGI and WDI) and an index of inclusive growth constructed using principal component analysis (PCA). The findings indicate that institutional quality plays a major role in enhancing growth-environmental sustainability. The results further find a new phenomenon called environmental inclusive-growth Kuznets curve (EIKC) and added to the EKC debate. That is, at the early phase of inclusive growth, environmental degradation rises as well but environmental quality improves with the rise in inclusive growth at a higher phase of the relationship. The study recommends that policymakers should encourage the economies of sub-Saharan Africa to pursue inclusive growth and not compromise it for sustainability since sustainability comes later. Institutional quality which serves as a transmission mechanism in the study can as well be used as a robust and efficient structure to avoid adverse environmental externalities of inclusive growth.

The effects of foreign bank presence on financial development in Africa: The role of institutional quality

Our study investigated the impact of institutional quality on health system outcomes, utilizing worldwide governance indicators and analyzing data from 158 countries between 2001 and 2020. We employed Principal Component Analysis (PCA) to create a composite index of institutional quality and conducted various tests to select the appropriate econometric model. The role of institutional quality, along with other variables, in health outcomes was estimated using fixed effects and generalized method of moments (GMM) models. High-income and low-income countries were analyzed separately. The results of our study revealed that institutional quality, as measured by Control of Corruption, Voice and Accountability, Political Stability, Rule of Law, Regulatory Quality, and Government Effectiveness, had a negative impact on infant mortality rates and a positive impact on life expectancy. Similarly, variables such as GDP, mean years of schooling, total health expenditure, and urbanization rate showed a negative association with infant mortality rates and a positive association with life expectancy. Conversely, the logarithm of CO2 emissions exhibited a positive effect on infant mortality rates and a negative effect on life expectancy. These findings highlight the crucial role of institutional quality in determining health outcomes. Improving institutional quality contributes to the development of democratic and meritocratic systems, infrastructure enhancement, efficient tax and subsidy systems, optimal budget allocation, improved public education, and enhanced access to primary healthcare services. The influence of institutional quality is particularly significant in high-income countries compared to low-income countries. In conclusion, our study emphasizes the importance of institutional quality in shaping health system outcomes. Enhancing institutional quality is essential for the overall advancement of healthcare systems, encompassing governance, infrastructure, education, and access to healthcare services. It is crucial to prioritize efforts to improve institutional quality, especially in high-income countries, to achieve better health outcomes for populations worldwide.

To examine the impact of fiscal policy through public spending at provincial level in Vietnam, this study uses the combination among different regression methods for panel data of 63 Vietnamese provinces during the period 2010–2020. The Feasible General Least Squares (FGLS) estimator and S-GMM estimator shows that there exists a positive effect of government expenditure on provincial economic growth. Moreover, the contribution of investment expense to supporting economic activity is expected more effective than that of current expenditure in the context of Vietnamese provinces. With techniques for analysing the marginal effects of interactive variables in research model, the role of local institutional quality is confirmed to improve the positive impact of government expenditure on provincial economic growth. In general, some policy implications are suggested based on the results to help local government stimulate the economic development in Vietnam.