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The Role of Institutional Quality in Finance-Growth Nexus: Evidence from North African Countries

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A Correction to this article was published on 14 February 2022

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Abstract

This study aims to determine the relationship between financial development and economic growth with respect to the state of institutional quality in 4 North African countries over the 2000–2018 period. Using the dynamic generalized method of moments in a panel data analysis, we found that financial development has a positive effect on economic growth. Equally important, institutional quality plays a significant and positive role in economic growth. More interestingly, the study finds that institutional development is complementary to financial development. As a policy implication, we recommend that policymakers place special importance on implementing policies that result in the deepening of financial systems, including a sound institutional framework. Thus, by promoting the development of a country’s financial system, economic growth will be accelerated.

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Notes

  1. There is an extensive literature that looks at the role of institutions on economic growth. See, among others, Acemoglu et al. (2001), Glaeser et al. (2004), and De Haan (2007).

  2. Here, we follow Law et al. (2013), who accounted for macroeconomic stability in a growth regression by including the inflation rate and the size of government.

  3. In order to avoid heteroskedasticity problems resulting from the high variability of inflation rates, inflation is defined as log(1 + Inf/100).

  4. The null hypothesis of those two tests is that the instruments are valid.

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  1. Higher Institute of Business Administration, University of Sfax, Sfax, Tunisia

    Imen Mohamed Sghaier

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The original online version of this article was revised: The original version of this article, published on 25 October 2021, the author has found errors in the published version of the paper. In page 3, the remainder of this paper is organized as follows. The “Overview of Financial Development in the North African Countries” section presents a summary of the North African financial systems; then, the “Literature Review”….. Another error is in Table 1, in column “North Africa” row “Number of branches”, value should be 13905 not .13905. Also in the paper, there are several words that are written in Italics that should be corrected.

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Mohamed Sghaier, I. The Role of Institutional Quality in Finance-Growth Nexus: Evidence from North African Countries. J Knowl Econ 13, 3472–3491 (2022). https://doi.org/10.1007/s13132-021-00850-6

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