Modelling the Impact of Governance and Economic Growth: Insights From ASEAN and Developed Countries

Abstract

Rule of law, political stability, anti-corruption measures, and regulatory quality by the government all play a critical role in analyzing economic growth in many countries. Thus, the study empirically examines the links connecting governance and economic growth in 15 emerging and developed nations. This research applies the dynamic panel data of the GMM estimator to look into the function of governance in predicting the growth performance of the economies of ASEAN and five selected economies. According to the findings, corruption control, government effectiveness, and regulatory variables can be used as a proxy for economic growth. Therefore, other governance proxies had no effect on GDP growth during the studied time frame. A separate test was also conducted using the GMM estimator to examine the influence of governance in both emerging and developed country contexts. The results show that government effectiveness in developed economies is the only governance proxy that has a sizeable positive influence on economic growth. This result emphasizes the notion that there is a significant discrepancy between the government's effectiveness in developed and emerging countries. Considering global governance efforts, we propose that public institutions and government agencies reevaluate their approaches and rededicate their efforts to develop strategic governance promoting inclusive and long-term growth. The main contribution of this work is underscored by highlighting the significance of integrating governance with economic development. The importance of linking governance with economic growth is highlighted, which is one of the work's main contributions.