The impact of governance, exchange rate and fiscal policy on economic growth in developing countries
Main Article Content
Abstract
This study uses a GMM in system to assess the impact of governance, exchange rate and fiscal policy on economic growth in 83 developing countries during the period between 2002 and 2019. The data are collected from the World Bank. The results show that the quality of governance and fiscal policy have a negative impact on economic growth, meanwhile exchange rate has a positive impact on economic growth. This study result is consistent with the study of Hadj Fraj et al. (2018), Montes et al. (2018). The reason why the quality of governance has a negative impact on economic growth may be because the quality of governance in the developing countries is still low. Specifically, the average scores of governance indicators such as: rule of law, government effectiveness, and control of corruption are respectively -0.415, -0.363, and -0,415 in the scale from -2.5 to +2.5. As the result of the research, the authors believe that the developing countries need to improve the quality of governance and implement appropriate exchange rate policies to promote economic growth.
Article Details
Keywords
Fiscal policy, Governance, Economic growth, Exchange rat
References
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The review of economic studies, 58(2), 277-297.
Baldacci, E., Hillman, A. L., & Kojo, N. C. (2004). Growth, governance, and fiscal policy transmission channels in low-income countries. European Journal of Political Economy, 20(3), 517-549.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of econometrics, 87(1), 115-143.
Everest-Phillips, M., & Sandall, R. (2009). Linking Business Tax Reform with Governance: How to Measure Success (No. 10572). The World Bank.
Hadj Fraj, S., Hamdaoui, M., & Maktouf, S. (2018). Governance and economic growth: The role of the exchange rate regime. International Economics, 156(C), 326-364.
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and Analytical Issues1. Hague journal on the rule of law, 3(2), 220-246.
Keynes, J.M.(1936). The General Theory of Employment, Interest and Money. Macmillan
Montes, G. C., & Paschoal, P. C. (2016). Corruption: what are the effects on government effectiveness? Empirical evidence considering developed and developing countries. Applied Economics Letters, 23(2), 146-150.
Montes, G., Bastos, J. C. A., & de Oliveira, A. J. (2019). Fiscal transparency, government effectiveness and government spending efficiency: Some international evidence based on panel data approach. Economic Modelling, 79(C), 211-225.
North, D. C.(1990). Institutional Change, and Economic Performance. New York: Cambridge University Press.
Poniatowicz, M., Dziemianowicz, R., & Kargol-Wasiluk, A. (2020). Good Governance and Institutional Quality of Public Sector: Theoretical and Empirical Implications. European Research Studies Journal, 23(2), 529-556.
Romelli, D., Terra, C., & Vasconcelos, E. (2018). Current account and real exchange rate changes: The impact of trade openness. European Economic Review, 105, 135-158.
Most read articles by the same author(s)
- Ho Thuy Tien, Tran Thi Kim Oanh, Nguyen Viet Hong Anh, Factors affecting the decision to participate in voluntary social insurance: A case study in Khanh Hoa province , Journal of Finance and Marketing: No. 65 (2021)