Studying the Effects of Good Governance Indicators on Economic Growth in Iran; Vector Error Correction Approach

According to institutionalize, the weakness of structure and function of the institutions is one of the major problem in underdeveloped countries. Good governance as an opportunity for increasing economic growth, economic security and improving business environment through the deployment of six indicators; control of corruption, government effectiveness, political stability and absence of violence, regulatory quality, rule of law and accountability are studied on this paper. The aim of present study is to explain mechanism of relationship between good governance and economic growth, Using vector error correction econometric model, the impact of each of the governance indicators on economic growth during the period 1983-2015 for Iran are examined. The results of the models indicate that all Governance Indicators have a significant positive impact on economic growth. So that between governance indicators, regulation quality and accountability, had the highest and lowest impact on economic growth, respectively. Results of vector error correction coefficients showed that between Governance Indicators, highest error correction coefficient corresponding to accountability indicator with 0.70 percent and lowest coefficient corresponding to rule of law indicator with 0.46 percent are consistent.