Do Institutional Quality and Trade Openness Influence Economic Growth? An Empirical Evidence from India

Arun Giri and Geetilaxmi Mohapatra ()
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Geetilaxmi Mohapatra: Birla Institute of Technology and Science (BITS)

A chapter in Studies in International Economics and Finance, 2022, pp 165-182 from Springer

Abstract: Abstract The study empirically examines the impact of trade openness and institutional quality on economic growth in India for the period 1990–2019. The study uses export plus imports as a ratio of GDP and composite governance indicators to measure trade openness and institutional quality, respectively. GDP per capita is used as the proxy for economic growth along with financial development, domestic capital, exchange rate, and inflation as other conventional determinants of economic growth. Autoregressive distributed lag (ARDL) co-integration approach along with the first-generation unit root tests is used in the present study to test empirical relationships. The results reveal that both trade openness and institutional quality exert a significant and positive impact on economic growth in both the long and short runs. Further, the interaction of trade openness and institutional quality is shown to have a significant impact on economic growth as well. The estimates also confirm that domestic capital and financial development have a significant positive influence on the economic growth of the country. The results further indicate that the exchange rate has a significant negative impact on economic growth in both long run and short run.

Keywords: Trade openness; Institutional quality; Economic growth; ARDL; India (search for similar items in EconPapers)
JEL-codes: C22 F10 F43 O40 O43 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-16-7062-6_9

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DOI: 10.1007/978-981-16-7062-6_9

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