An Analysis of Correlations between Institutional Governance and Economic Development in Zimbabwe

Abstract

The main focus of this study was to analyse the correlations between institutional governance and economic development using annual time series data covering the period 1996 to 2019. Since there has not been much attention given to the role of institutional governance in facilitating the economic recovery in Zimbabwe, the economy has failed to register sustainable economic growth post-2000. To give an insight into the major variable excluded in the formulation of national policies, an econometric Pearson correlation model for correlations between institutional governance and economic development was applied. Economic development was measured using GDP per capita growth while institutional governance was measured by four variables, namely, the rule of law index, voice and accountability index, regulatory quality index, and political stability index. The empirical outcome reveals a strong positive correlation between institutional governance variables and GDP per capita growth. Hence, this study recommends that Parliament should exercise its powers to hold public institutions and all other state organs accountable for respecting the rule of law and maintaining political stability; macro-stabilisation institutions should implement sound economic policies; and there should be an immediate response by institutions to curb illicit economic operations to minimise economic leakages. These reforms need institutional political independence to be implemented and can facilitate economic development. Therefore, instead of targeting only macroeconomic indicators as a way out to resolve the economic crisis, this study provides policy makers in Zimbabwe with insight into recommendations for institutional reforms to improve the effectiveness of institutional governance to promote sustainable economic development. Keywords: Correlation, Governance, Institution, Economic development, Zimbabwe