The effect of governance quality and government expenditure on economic growth: SADC PMG-ARDL panel data analysis

Abstract

There is a dichotomy between the conventional theoretical view, which postulates that increased quality of governance stimulates economic growth and advances private capital formation. This study investigates the impact of governance quality and government expenditure on economic growth in the Southern African Development Community (SADC) region. The study applied the Pooled Mean Group and Autoregressive Distributed Lag (PMG-ARDL) model. The annual panel covers the period 2002 – 2023, which comprises five selected countries from the SADC member states. The data set was obtained from the World Bank World Governance Indicators (WBWGI) databases. In the short run, economic growth was linked to government expenditure. In the long run, technical governance quality variables bring participants into action or service through control of corruption and the rule of law. The technical governance quality variables contribute to economic growth and are positive in the long run. At the same time, democratic governance quality variables influence economic growth negatively. However, it was highlighted that a permanent increase in country government expenditure could be experienced due to continuous randomness. The study revealed that weak governance and unstable government expenditure deteriorate economic growth complexity. Henceforth, this study has also enhanced the governance quality and government expenditure theories and empirical literature concerning economic growth by exposing that the governance quality of the selected SADC countries endures commotion. This study recommends that achieving selected SADC growth can be possible by balancing the technical governance quality variables and abating the democratic governance quality variables. Thus, the study contributes by outlining the golden thread that national and international policies should be prioritized in control of corruption and endorse governance effectiveness, regulatory quality, the rule of law, and managing expenditure within the threshold level.

Keywords: {'name': 'Economic growth'}, {'name': 'Governance'}, {'name': 'Regulatory quality'}, {'name': 'PMG-ARDL'}, {'name': 'SADC member states'}

Authors & affiliations

Ndivhuho Eunice Ratombo
Affiliation not supplied

Itumeleng Pleasure Mongale
Affiliation not supplied

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