[STBI-18-11-2016] Co-integration linkage Among Public Finance , Governance Quality and Economic Growth: A Global Empirical Study
The literature on a relationship among public finance, governance quality, and economic growth is various and indistinct. To examine the cointegration linkage among public finance, governance quality, and economic growth, this study applies the long-term and short-term cointegration test for a panel data of 113 developed and developing countries from 1998 to 2015. We extract the six institutional quality indicators for evaluating the quality of governance. Our empirical findings show an existence of long-term cointegration linkage among public finance, governance quality, and economic growth. Moreover, running cointegration regression by MG and PMG model indicates the effect of government expenditure on economic growth is complicated. Notably, applying SUR model to estimate growth effect of public finance and quality of governance, saying the robust results of government spending’s role. Our findings boost the literature on the essential role of the government and public finance in fostering economies of all countries.