Institutional bureaucracy and real sector movement

Abstract

Institutional bureaucracy is an infrastructure and a social overhead capital (SOC). SOC covers social set values expressed with confidence, norms and networks. Research using SOC index as an evidence of institutional behavior. The purpose of this research is to show that the SOC index has significant influence on investment decisions and vice versa on national product. Standard monetary transmission instruments such as interest rates, exchange rates, prices of financial assets, and base money as evidence of inflation and bank loans, as long as SOC index as explanatory (independent) variables regressed to GDP, GRDP or investment as the dependent variable. The regression results indicate a low SOC index showing the inability of economies to provide a conducive response of monetary transmission channel. Therefore, the research results imply that the government must set a high priority in solving the problem of slow institutional response to the earning opportunities.