Investigating the Impact of Natural Resource Abundance and Institutional Quality on Economic Growth in Recession and Boom Regimes

Document Type : Research Paper

Authors

1 Faculty of Economics, Islamic Azad University, Central Tehran Branch, Tehran, Iran

2 Assistant Professor of Economics, Islamic Azad University,Tehran Branch

3 Professor of Economics, University of Allameh Tabatabai

4 Professor of Economics, Islamic Azad University, Tehran Branch

Abstract

The effect of abundance of natural resources on economic performance has been one of the most important topics in recent decades in the country. This issue has always been a source of controversy among experts and economic experts. The noteworthy point is that paying attention to the importance of the role of institutions in economic performance both in general and in detail is agreed by most economic thinkers today. In this study, we seek to investigate the impact of the abundance of natural resources and institutional quality on economic growth in recession and prosperity regimes. For this purpose, the effect of study variables during the period of 1994 to 2020 is investigated by using the rotation model and Markov switching regime change. According to the estimation results of the model, the amount of exposure of the economy in the current research is 10 periods of recession compared to 16 periods of prosperity in the model. Also, according to the estimation results, in the second regime, i.e. the boom period, with the increase in the growth rate of oil revenues and institutional quality, it has led to an increase in the economic growth rate, and in the first regime, i.e. the recession period, it has led to a decrease in the economic growth rate.

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Quarterly Journal of Applied Theories of Economics
Volume 9, Issue 3 - Serial Number 34
December 2022
Pages 231-256

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