Impact of trade openness, human capital, and institutional performance on economic growth: Evidence from Organization of Islamic Cooperation countries

Abstract

The study analyzes the impact of trade openness, human capital, and institutional performance on economic growth in OIC countries. The traditional methodologies of panel data ignore the issues of cross-sectional dependence (CD) and heterogeneity and give spurious results. A novel econometric technique "dynamic common correlated effects (DCCE)" is used to tackle these issues. The long-run estimates indicate that trade openness, human capital, and public expenditure have a positive and significant association with economic growth for higher-income and overall OIC countries. However, trade openness has a negative, and human capital has an insignificant correlation with economic growth in lower-income OIC countries. Institutional performance is positively correlated with economic growth in all groups of OIC countries. The study tends to support the call for the continuation of trade openness and human capital formation policies for overall and higher-income OIC countries to get benefits in the form of economic growth.

Impact of Public Debt on Economic Growth: A Quantile Regression Approach

“…The coefficient of institutional quality (INS) had a significant and positive impact on the distribution of economic growth except for quantiles 0.25 and 0.50, in which case it was insignificant. The finding is consistent with the finding of Hasan et al (2009), Ahmad and Hall (2017) and Ali et al (2021). However, the result of GMM estimations illustrated that good institutional quality had a detrimental effect on economic performance.…”

The impact of trade openness on the cost of financial intermediation and bank performance: evidence from BRICS countries

“…and more efficient management contribute to higher performance. This is supported by the previous studies (Ali et al, 2021;Bui and Bui, 2020;Chiang and Ab-Rahim, 2016;G€ achter and Gkrintzalis, 2017;Le et al, 2016), which reported that higher capital of banks results in higher profitability level. Finally, LLPTA showed a negative and statistically significant relationship with banks' performance in each model, indicating that banks' performance is lessened by the higher credit risk of each bank (Omoke and Opuala-Charles, 2021;Raji et al, 2017;Shaohua et al, 2021;Soedarmono and Tarazi, 2016;Tahir et al, 2019;Triki et al, 2017;Xu, 2016).…”

“…Higher values of these proxies indicate a higher cost of financial intermediation and vice versa. Following Ali et al (2021) and Sharma and Anand (2018), the bank performance was proxied by an alternative measure: the ratio of annual values of return on assets before loan loss provisions and taxes over average total assets (ROA). The higher value of this measure means higher performance and vice versa.…”

“…Thus, how trade openness influences the cost of financial intermediation and bank performance is an important research question among policymakers and researchers. According to Abrar et al (2021), Ahmad et al (2021), Ali et al (2021), Dauda et al (2021), Kong et al (2021), Bandura (2020) and Asamoah et al (2019), trade openness has contributed significantly to the economic growth of both developed and developing countries during the past few decades. Previous studies have documented the importance of trade openness to economic growth (Li and Wei, 2021;Sghaier, 2021;Ngouhouo et al, 2021;Moudud-Ul-Huq, 2019;Le et al, 2019).…”

“…Deng and Zhang (2020) stated that the liberalization of interest rates, which would significantly reduce the bad loans, could be created by reducing the cost of financial intermediation. Trade openness has a pervasive effect on the growth of a country's economy (Ahmad et al, 2021;Ali et al, 2021). Moreover, De Man (1994), Cho and Moon (2013) and Myint (1977) declared that openness to trade affects virtually all sectors (full or partially deregulated and liberalized).…”