Pakistan Institute of Development Economics



Economic Institutions and Growth Nexus: The Role of Governanceand Democratic Institutions—Evidence from Time Varying Parameters’(TVPs) Models

The present study has investigated the channels through whichthe linkage between economic institutions and growth is gauged, byaddressing the main hypothesis of the study that whether quality ofgovernance and democratic institutions set a stage for economicinstitutions to promote the long-term growth process in Pakistan. Totest the hypothesis empirically, our study models the dynamicrelationship between growth and economic institutions in a time varyingframework in order to capture institutional developments and structuralchanges occurred in the economy of Pakistan over the years. Studyarticulates that, along with some customary specifics, the quality ofgovernment and democracy are the substantial factors that affectinstitutional quality and ultimately cause to promote growth inPakistan. JEL Classification: O40; P16; C14; H10 Keywords: EconomicInstitutions, Growth, Governance and Democracy, Rolling Window Two-stageLeast Squares, Pakistan

Ghulam Murtaza,

Muhammad Zahir Faridi