Institutional Quality and Economic Growth: Panel ARDL Analysis for Selected Developing Economies of Asia

The role of institutions in economic growth has received much attention of the researchers and policy makers in the last two decades. The literature available on this issue is not clear. The literature reveals that there is a growing dissatisfaction over the neo-classical and endogenous growth models. In recent literature institutional economics has emerged for determining the economic growth. In view of this fact, the present study is an attempt to explain the impact of institutional quality on economic growth in developing economies of Asia. The study uses panel data for the period 1990-2013 for 13 developing economies of Asia. Institutional quality index has been constructed by using principal component analysis. The results of Panel ARDL show that institutional quality has positive impact on economic growth. The results of panel causality test show that causality runs from institutional quality to economic growth. The study stresses that for increasing economic growth there is a need to improve institutional quality in selected Asian developing countries.