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Testing Causal Relationship between Institutional Quality and Inclusive Growth: Evidence from Panel Causality Tests

Author

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  • Raifu, Isiaka Akande
  • Afolabi, Joshua Adeyemi
  • Kumeka, Terver Theophilus

Abstract

This study utilizes data from 162 countries to examine the nature and direction of causality between institutional quality and inclusive growth from 1996 to 2020. It employs three distinctive panel causality test methods to ensure the robustness and validity of the findings. The results of one of the causality test methods show mixed findings, while those of the other two methods provide evidence that institutional quality and inclusive growth reinforce each other. Overall, the results are robust to alternative estimation methods. These findings hold significant policy implications, emphasising that governments across all countries should prioritise the development of strong institutions and policies that promote inclusive growth as complementary strategies for sustainable development.

Suggested Citation

  • Raifu, Isiaka Akande & Afolabi, Joshua Adeyemi & Kumeka, Terver Theophilus, 2026. "Testing Causal Relationship between Institutional Quality and Inclusive Growth: Evidence from Panel Causality Tests," MPRA Paper 128141, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:128141
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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