Volume 2 • Issue 2 | June, 2018

Budget Deficit, Institutional Quality and Economic Growth: Empirical Evidence from South East Asian Countries

Nguyen Thi My LInh

Abstract: Welfare of successive generations is determined by the sustainable economic growth and sound macroeconomic policies. Economic growth is a major determinant of living standards in society when it is achieved with low and stable inflation and unemployment rates. The objective of this study is to examine how the fiscal deficit, trade openness, financial deepening, domestic credit by banking sector, inflation and institutional quality affect the economy of South East Asian countries. We employ the Generalized Method of Moments (GMM) to analyse a panel data of eight countries from 2000 to 2016. The regression results show that trade openness and domestic credit provided by banking sector have significantly positive influence on economic growth. Meanwhile, budget deficit, financial deepening and particularly institutional quality have significantly negative impacts on economic growth. This result provides significant implications to policy makers in the studied countries.