Relationship Between Institutional Quality, Financial Development and Inclusive Growth: Empirical Evidence from SAARC Countries
Abstract
The current study investigated the influence of financial development and institutional quality on inclusive growth. Financial Developmenthas a bi-directional effect on inclusive growth. When it comes to establishing a solid connection between inclusive growth and financial development, institutional quality acts as a moderator. GDP per capita income is utilized to determine inclusive growth, credit to private sector is utilized to determine financial development, and rule of law and government effectiveness is used to measure institutional quality. The current study selected four SAARC nations Pakistan, India, Bangladesh, and Sri Lanka and data from 2000–2022, to study the connection between inclusive growth, institutional quality, and financial development. The results showed a negative and significant linear relationship between inclusive growth and financial development, but a strong positive association between institutional quality and inclusive growth. The SAARC countries must therefore adhere to the rule of law and maintain effective government in order to utilize financial resources in pursuit of inclusive economic growth.
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