Alireza Borhanipour; Gholamreza Geraeinejad; Alireza Daghighi asli; Manijeh Hadinejad
Abstract
The main aim of this paper is to investigate the threshold effects of good governance index on economic growth for upper middle income countries and presence of other variables, including education expenditures, gross capital formation, inflation rate and trade openness over the period 1996-2018. For ...
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The main aim of this paper is to investigate the threshold effects of good governance index on economic growth for upper middle income countries and presence of other variables, including education expenditures, gross capital formation, inflation rate and trade openness over the period 1996-2018. For this purpose, the Panel Smooth Transition Regression (PSTR) model has been utilized for model estimation. The estimation results of model reject the linearity hypothesis, and estimate a continuous transition function with two regimes that gives a threshold at good governance of -0.94 with speed of transition 1.74 for investigated countries. Moreover the study results indicate good governance, trade openness, education expenditures and gross capital formation have a positive impact on economic growth that their impacts are increased in the values above a threshold which is calculated for good governance. The other results indicate that the influencing coefficient of the inflation rate variable is negative and significant in two regimes. Though, its impact is declined in second regime. Hence, improving the quality of governance and efficient institutions promote the economic growth and development in the selected countries. Moreover, the transparency, government effectiveness and control of corruption indices have positive and significant impacts on the real GDP growth in selected countries.
