Long-run impact of institutional quality on economic growth: Evidence from ASEAN countries

This study aims to assess the long-term impact of institutional quality on economic growth in ASEAN countries over the period 2000-2022. The study uses panel data sourced from the World Development Indicators (WDI) for the years 2000 to 2022. It employs Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegrating Regression (CCR) estimation techniques to evaluate the relationship between institutional quality and economic growth. Institutional quality is represented by six key indicators: voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption. Control variables include investment capital, human capital, trade openness, and the inflation rate. The empirical results indicate that voice and accountability, political stability, and the rule of law have a positive and statistically significant impact on long-run economic growth in ASEAN countries. In contrast, government effectiveness, regulatory quality, and control of corruption are found to have a negative impact on economic growth. Furthermore, investment capital, human capital, and the inflation rate contribute positively to growth, whereas trade openness exerts a negative influence. Based on the results, the study proposes several policy recommendations aimed at strengthening institutional quality to support long-term economic growth in ASEAN countries. Policymakers should prioritize improvements in the institutional components that show positive effects while critically reassessing and reforming the areas found to negatively influence growth.