Role of Institutional Quality in Trade Openness and Economic Growth Nexus: Empirical Evidence from India

Abstract

In changing context of the present-day world, trade openness has a crucial role to play in economic development of different countries. Besides other factors, institutional quality plays a vibrant role in achieving a high growth rate. The objective of the present study is to understand how institutional quality influences economic growth and trade openness in India. To achieve the objectives of the study, Autoregressive Distributed Lag bound testing approach has been used. The findings show that there exists long-run relationship between the variables used in this study. From the findings, it can be concluded that total trade has a negative impact, whereas export enhances economic growth in the country. The results also show that improvement in institutional quality has a positive impact on economic growth. Thus the findings suggest that the country needs to adopt policies that can improve the quality of institutions and can enhance the formation of physical and human capital.