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The Causal Relationship between Institutions and Economic Growth: An Empirical Investigation for Pakistan Economy

  • Siddiqui, Danish Ahmed
  • Ahmed, Qazi Masood

This paper investigates relationship between institutional quality and economic performance in Pakistan using the Johansen-Juselius cointegration technique and the Granger causality test. The study results indicate that Institutions and growth are cointegrated and thus exhibit a reliable long run relationship. The Granger causality test findings indicate that the causality between Institutions and growth is uni-directional. However, there is no short run causality from Institutions to growth and vice versa. Therefore, as a policy implication that institutional quality may cause to the sustainable increase in country’s income in the long run, and success of any policy could be influenced by the soundness of institutions.

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File URL: https://mpra.ub.uni-muenchen.de/19745/1/MPRA_paper_19745.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19745.

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Date of creation: 28 Dec 2009
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Handle: RePEc:pra:mprapa:19745
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