Institutional quality and trade openness-economic growth nexus in the Arab Maghreb Union
The continued failures to become high-income countries of the Arab Maghreb Union (AMU) countries have led to a renewed focus on the fundamental determinants of economic growth and the economic impact of the quality of institutional factors in these countries. This study examines the direct effects o...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Asian Scholars Network
2024
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| Subjects: | |
| Online Access: | http://irep.iium.edu.my/116166/1/Institutional%20Quality%20and%20Trade%20Openness-Economic%20Growth%20Nexus%20in%20the%20Arab%20Maghreb%20Union.pdf http://irep.iium.edu.my/116166/ https://myjms.mohe.gov.my/index.php/ijbtm/article/view/28349 |
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| Summary: | The continued failures to become high-income countries of the Arab Maghreb Union (AMU) countries have led to a renewed focus on the fundamental determinants of economic growth and the economic impact of the quality of institutional factors in these countries. This study examines the direct effects of trade openness and institutional quality and the moderating effect of institutional quality on trade openness-economic growth nexus of AMU countries from 1996 to 2022. The institutional quality is proxied by the overall factors’ score of the Worldwide Governance Indicators (WGI). The study employs panel data estimation models where the Hausman test is used for model specification between the two techniques: the fixed effect model (FEM) and the random effect model (REM). The study’s findings reveal that trade openness has a significant positive impact on AMU’s economic growth. In contrast, institutional quality does not directly affect economic growth, implying that institutions in AMU countries are underdeveloped. More importantly, the marginal effect of trade openness is positively and significantly associated with growth for all levels of institutional quality, implying that institutional quality matters for trade openness-growth nexus in AMU economies. The results imply that inflation and labor force significantly and positively affect economic growth. According to the results, the human capital index has not impacted the economic growth of the sampled countries as expected. Instead, the study finds that the human capital index has adversely affected economic growth. Finally, the relationship between trade openness and GDP growth is highly dependent on the institutional quality of AMU nations. Thus, to foster economic growth in AMU countries, the findings suggest a focused strategy to improve institutional quality. |
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