## Institutions and Growth: a GMM/IV Panel VAR Approach

_IMF Working Papers, July 27, 2015_

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## Bibliographic details
- Authors: Carlos Góes
- Published: July 27, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513555508.001

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### Methodology
- Builds a panel structural vector autoregression (SVAR) model for a short panel of 119 countries over 10 years.
- Controls for individual fixed effects.
- Uses a proxy for institutional quality; also tests a different proxy for institutional quality to check robustness.
- Employs GMM/IV techniques within a Panel VAR framework (structural vector autoregression, vector autoregression).

### Main findings
- The analysis finds support for the institutions hypothesis.
- Exogenous shocks to a proxy for institutional quality have a positive and statistically significant effect on GDP per capita.
- On average, a 1 percent shock in institutional quality leads to a peak 1.7 percent increase in GDP per capita after six years.
- Results are robust to using a different proxy for institutional quality.

### Heterogeneity and dynamics
- There are different dynamics for advanced economies and developing countries.
- The evidence suggests diminishing returns to institutional quality improvements.

### Keywords and subjects (as listed)
- Econometric analysis, Estimation techniques, National accounts, Personal income, Structural vector autoregression, Vector autoregression.
- Economic Development, EFW index, endogenous variable, estimation sample, expropriation index, index AJR, Institutions, Panel VAR, time series, WP.

*Institutions and Growth: a GMM/IV Panel VAR Approach — Carlos Góes, IMF Working Paper No. 2015/174*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/institutions-and-growth-a-gmm-iv-panel-var-approach-43128_