The impact of economic growth and good governance on misery index in Iranian economy

Abstract

Potentially Speaking, Iranian economy is one of the wealthiest one in Middle East and even among other developing countries in the region. In practice, however, mismanagement and bad governance of public sector and some other infrastructural shortcomings have led this economy to its current inefficient situation in which we face with one of the highest misery index, MI, along with one of the lowest economic growth rate in the world. This article is investigating this subject. At, one hand it is analyzing the relationship between misery index, MI, and economic growth in Iran, and at the other hand it studies the impact of governance on MI for 1974–2011 periods. To achieve this goal, vector autoregressive model has been used. We have also used the government effectiveness as a proxy for good governance, which, we think, is meaningful in Iranian case. By using dickey-fuller test the stability of variables, has been examined. We also have applied the Granger causality and Johnson test for considering the convergence among variables. One finding of this paper is that, economic growth has had negative relation with MI. Another result is that there is a significant relationship between type of governance and MI. For instance, during recent administration (2005–2011), we are encountering with the worst good governance indexes, the lowest economic growth, and the highest MI as well.