The Relationship Between Governance and Economic Growth in Intergovernmental Authority on Development Member States

Abstract

Bretton Woods system of monetary management which include international organizations such as the United Nations, the International Monetary Fund, and the World Bank, among others continue to promote robust economic growth practices through effective public governance. Governance is at the center stage for the attainment of economic prosperity thus having gained great attention from different players globally. To that end, this study seeks to examine the link between institutional (governance) quality and economic growth among the IGAD member countries. Moreover, the study seeks to investigate whether there exists a link between varied macroeconomic factors and economic growth in these IGAD member countries. The study employed panel data spanning between 1996 to 2020 and utilized the panel estimation technique to estimate the variables of interest. The study findings found that governance has a positive effect on economic growth although some governance indicators showed a negative effect on economic growth. Unemployment rate, voice and accountability, political stability, and government effectiveness variables were statistically insignificant. On the other hand, regulatory quality, control of corruption, rule of law, gross capital fixed formation, and population growth variables were statistically significant. However, control of corruption had a negative influence on economic growth. Lastly, population growth rate had a strong but negative relationship on economic growth in these IGAD countries. The study suggests that government officials, policymakers, lawmakers, and other players should prioritize on strengthening institutional quality in order to stimulate economic growth. Moreover, they should strengthen the governance aspects mainly entailing; voice and accountability, political stability, efficiency in government, quality of regulation, the rule of law, and corruption control. Key macroeconomic factors should be accorded a priority so as to achieve economic growth. These involve regulating population growth rates by instituting birth control and family planning campaigns. Finally, capital stock formation through savings and Foreign Direct Investment is critical for realizing economic growth.