Institutional determinants of investment in transition economies
Investment has been found to be a significant determinant of growth. This paperanalyses the effects of institutions and transition progress on investment rates oftransition economies since the collapse of the Socialist Bloc. Political institution ismeasured by the Freedom House’s Political Rights and Civil Liberties indexes;economic institution is proxied by the Index of Economic Freedom compiled by theHeritage Foundation; and transition progress is documented by the European Bank forReconstruction and Development’s transition index. Panel data estimation techniquesare applied and the results show that institutions and transition progress have expected and significant effect on investment rates of transition economies. However, it is the progress in all aspects of economic freedom that matters; just some individual economic freedom measures are significant marginally. Besides, as conditioning variables, growth, saving and financial development (liquid liabilities as % of GDP) are also found to have significant and positive effect on investment in transition economies. This paper highlights the indirect effect of institutions on economic growth via investment.
Year of publication: |
2009
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Authors: | Dang, V |
Publisher: |
Brunel University |
Subject: | Institutions | Liberalisation | Investment | Transition economies |
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