The Impact of Institutional and Economic Factors on Economic Growth in Selected SAARC Countries: Panel Data Analysis

Following the Second World War, numerous global economic organisations were established to restructure the world economy and foster increased international cooperation. Inspired by these organisations, the South Asian Association for Regional Cooperation (SAARC) was established among South Asian countries to eliminate the disconnect that occurred in South Asia after the end of the Cold War and to increase regional cooperation, improve the quality of life, accelerate economic growth in the region, eliminate poverty, institutional infrastructure, boost trade, promote social and cultural development, and ensure that the people of the region live a dignified life by revealing their potential and ensure border integrity, political independence, and non-interference in each other’s internal affairs among member countries. However, compared to other regional economic cooperation organisations, SAARC countries (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka), which are known as a rapidly growing economic region with about one-fifth of the world’s population, have not achieved effective economic integration at the expected level.The main objective of this study is to analyse the economic and institutional factors affecting economic growth in selected SAARC countries for the periods 2002-2022 and 2002-2021 using two separate random effects models. As a result of various tests conducted within the scope of the study, the most appropriate model was determined, and the coefficients were interpreted over the final model. According to the results, fixed capital formation, foreign aid, government expenditures, corruption control, and political stability factors have a positive effect on economic growth in selected SAARC countries. On the other hand, the coefficient representing the effect of the labour force on economic growth is negative and statistically significant. However, the coefficient indicating the effect of the level of democracy on economic growth is positive but not statistically significant, suggesting that the level of democracy does not have a significant effect on growth in the period and countries analysed.