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The Bidirectional Causality between Country-Level Governance, Economic Growth and Sustainable Development: A Cross-Country Data Analysis

Cristina Boţa-Avram (), Adrian Grosanu (), Paula-Ramona Răchişan () and Marius Dan Gavriletea ()
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Cristina Boţa-Avram: Faculty of Economics and Business Administration, Babeş-Bolyai University, 400084 Cluj-Napoca, Romania
Paula-Ramona Răchişan: Faculty of Business, Babeş-Bolyai University, 400084 Cluj-Napoca, Romania
Marius Dan Gavriletea: Faculty of Business, Babeş-Bolyai University, 400084 Cluj-Napoca, Romania

Sustainability, 2018, vol. 10, issue 2, 1-24

Abstract: In the context of contemporary society, characterized by the information users’ growing and differentiated needs, the way country-level governance and social responsibility contribute to the ensuring of sustainable economic development is a concern for all the actors of the economic sphere. The aim of this paper is to test the causal linkages between the quality of country-level governance, economic growth and a well-known indicator of economic sustainable development, for a large panel of world-wide countries for a period of 10 years (2006–2015). While there are some prior studies that have argued the bidirectional causality between good public governance and economic development, this study intends to provide a new focus on the relationship between country-level governance and economic growth, on one hand, and between country-level governance and adjusted net savings, as a selected indicator of economic sustainable development, on the other hand. Four hypotheses on the causal relationship between good governance, economic growth and sustainable development were tested by using Granger non -causality tests. Our findings resulting from Granger non -causality tests provide reasonable evidence of Granger causality from country-level governance to economic growth, but from economic growth to country-level governance, the causality is not confirmed. In what regards the relationship between country-level governance and adjusted net savings, the bidirectional Granger causality is not confirmed. The main implication of our study is that improving economic growth and sustainable development is a very challenging issue, and the impact of macro-level factors such as country-level governance should not be neglected.

Keywords: economic sustainable development; country-level governance; economic growth; gross domestic product; adjusted net savings as a percentage of gross national income; Granger non -causality test; vector autoregressive model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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