Does Institutional Quality Drive Economic Growth in the West African Monetary Zone?
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Abstract
This study investigates the influence of institutional quality on economic growth within the West African Monetary Zone (WAMZ) using panel Autoregressive Distributed Lag (ARDL) model techniques on data from 1990 to 2022. The findings highlight the crucial role of institutional quality in fostering long-run economic growth in the region. Notably, the control of corruption demonstrates a positive and significant impact on growth over the long run. However, its effect is insignificant in the short run. Conversely, economic freedom appears to impede growth in both time frames, with its short-run impact being statistically insignificant. The analysis indicates that the economy adjusts to long-run equilibrium at a rate of 83.39% following short-run deviations. Additionally, there is a unidirectional causality from control of corruption to economic growth, alongside a bidirectional causality between the economic freedom index and growth. Based on these findings, this study recommends that WAMZ governments prioritize strengthening legal and regulatory frameworks to combat corruption and enhance institutional transparency. Furthermore, the WAMZ government and policymakers should ensure a balanced approach between deregulation and necessary oversight, which is crucial for fostering sustainable economic growth in the region.
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