The Growing Role of Institutions under Global Uncertainty: Implications for Economic Growth in Emerging Markets

For emerging market economies, rising global uncertainty poses a critical challenge to design credible and effective policy responses. This study examines how institutional quality affects economic growth under different global uncertainty regimes, using data from 18 emerging market economies over the period 2002–2022. By employing a panel threshold regression approach, the analysis captures the nonlinear nature of this relationship and provides new empirical evidence on its regime-dependent dynamics. The results reveal that institutional quality exerts a positive and statistically significant impact on economic growth. Moreover, this positive effect becomes substantially stronger once global uncertainty exceeds a specific threshold level, suggesting that institutions play an increasingly vital role in periods of heightened instability. The analysis also incorporates control variables derived from the Mankiw–Romer–Weil (MRW) growth model, confirming the model’s relevance in explaining growth dynamics for emerging economies. Overall, the study underscores that structural reforms aimed at strengthening institutional quality are essential for sustaining growth in emerging market economies, particularly during times of elevated global uncertainty.