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The Bidirectional Causality between Country-Level Governance, Economic Growth and Sustainable Development: A Cross-Country Data Analysis

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  • Cristina Boţa-Avram

    (Faculty of Economics and Business Administration, Babeş-Bolyai University, 400084 Cluj-Napoca, Romania)

  • Adrian Groşanu

    (Faculty of Economics and Business Administration, Babeş-Bolyai University, 400084 Cluj-Napoca, Romania)

  • Paula-Ramona Răchişan

    (Faculty of Business, Babeş-Bolyai University, 400084 Cluj-Napoca, Romania)

  • Marius Dan Gavriletea

    (Faculty of Business, Babeş-Bolyai University, 400084 Cluj-Napoca, Romania)

Abstract

In the context of contemporary society, characterized by the information users’ growing and differentiated needs, the way country-level governance and social responsibility contribute to the ensuring of sustainable economic development is a concern for all the actors of the economic sphere. The aim of this paper is to test the causal linkages between the quality of country-level governance, economic growth and a well-known indicator of economic sustainable development, for a large panel of world-wide countries for a period of 10 years (2006–2015). While there are some prior studies that have argued the bidirectional causality between good public governance and economic development, this study intends to provide a new focus on the relationship between country-level governance and economic growth, on one hand, and between country-level governance and adjusted net savings, as a selected indicator of economic sustainable development, on the other hand. Four hypotheses on the causal relationship between good governance, economic growth and sustainable development were tested by using Granger non -causality tests. Our findings resulting from Granger non -causality tests provide reasonable evidence of Granger causality from country-level governance to economic growth, but from economic growth to country-level governance, the causality is not confirmed. In what regards the relationship between country-level governance and adjusted net savings, the bidirectional Granger causality is not confirmed. The main implication of our study is that improving economic growth and sustainable development is a very challenging issue, and the impact of macro-level factors such as country-level governance should not be neglected.

Suggested Citation

  • Cristina Boţa-Avram & Adrian Groşanu & Paula-Ramona Răchişan & Marius Dan Gavriletea, 2018. "The Bidirectional Causality between Country-Level Governance, Economic Growth and Sustainable Development: A Cross-Country Data Analysis," Sustainability, MDPI, vol. 10(2), pages 1-24, February.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:2:p:502-:d:131775
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