Mediating Role of Good Governance between Debt Management and Economic Performance

Abstract

No one country of the planet is self-sufficient for financial and non-financial resources. Some have abundant of natural resources while someone have abundant of human resources and so on. Due to scarce of resources a country needs effective and efficient utilization of resources. Effective and efficient utilization of resources depends upon good governance, competent and sincere economic managers. Keeping in view of the said perception, current study examined the role of good governance in the debt management and economic performance. Current study used the World Bank data from the period of 1990 to 2020. Economic performance is measured by the per capita income (PCI) and taken as dependent variable. Whereas, debt to gross domestic product (GDP) is taken an independent variable. While good governance (GG) is taken as mediating variable and measured through The Worldwide Governance Indicators (WGI) project constructs aggregate indicators of six broad dimensions of governance such as voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of Law and Control of Corruption. Econometric equation is developed to measure the direct and indirect effect of GG with respect to debt to GDP and PCI. The study results concluded that there is no relationship between debt to GDP and economic development. While interesting finding is that there is significant relationship between GG and economic performance. Study also found insignificant mediation of GG between debt to GDP and economic development.