The Impact of Regulation according to International law on economic growth in ECO countries

Abstract

This paper investigates the long-run relationship between regulation and economic growth for a panel of ECO countries over the period 1990–2011 by employing the recently developed panel data unit root tests and the Pedroni panel data cointegration techniques. In particular, building effective regulatory structures in ECO countries is not simply an issue of the technical design of the most appropriate regulatory instruments; it is also concerned with the quality of supporting regulatory institutions and capacity. This paper explores the role of state regulation using an econometric model of the impact of regulation on growth. Furthermore, conditional on finding cointegration, the paper extends the literature by employing the Pedroni Panel Fully Modified Ordinary Least Squares (FMOLS) procedure to generate consistent estimates of the relevant panel variables. The results based on two different techniques of estimation suggest a strong causal link between regulatory quality and economic performance.

Keywords: Regulatory, Economic Growth, Panel Cointegration, ECO countries.