Testing Causal Relationship between Institutional Quality and Inclusive Growth: Evidence from Panel Causality Tests

Isiaka Akande Raifu, Joshua Adeyemi Afolabi and Terver Theophilus Kumeka

MPRA Paper from University Library of Munich, Germany

Abstract: This study utilizes data from 162 countries to examine the nature and direction of causality between institutional quality and inclusive growth from 1996 to 2020. It employs three distinctive panel causality test methods to ensure the robustness and validity of the findings. The results of one of the causality test methods show mixed findings, while those of the other two methods provide evidence that institutional quality and inclusive growth reinforce each other. Overall, the results are robust to alternative estimation methods. These findings hold significant policy implications, emphasising that governments across all countries should prioritise the development of strong institutions and policies that promote inclusive growth as complementary strategies for sustainable development.

Keywords: Institutional quality; Inclusive growth; Causality tests (search for similar items in EconPapers)
JEL-codes: C23 C33 E02 O15 O43 (search for similar items in EconPapers)
Date: 2026-02-24
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:128141

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