Factors Affecting Good Governance in Pakistan

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European Journal of Scientific Research ISSN 1450-216X Vol.35 No.3 (2009), pp.337-346 © EuroJournals Publishing, Inc. 2009 http://www.eurojournals.com/ejsr.htm

Factors Affecting Good Governance in Pakistan: An Empirical Analysis Imran Sharif Chaudhry Associate Professor, Department of Economics Bahauddin Zakariya University Multan, Pakistan E-mail: imranchaudhry@bzu.edu.pk Shahnawaz Malik Professor and Chairman, Department of Economics Bahauddin Zakariya University Multan, Pakistan E-mail: shahnawazmalik@bzu.edu.pk Khurram Nawaz Khan PhD Scholar, Department of Economics Bahauddin Zakariya University Multan, Pakistan Sohail Rasool PhD Scholar, Department of Economics Bahauddin Zakariya University Multan, Pakistan Abstract Good governance is the significant issue of sustainable economic development among others. The concept of good governance has gained significant attention in the world and especially in Pakistan in the last decade. Since there are few theoretical studies on this issue in Pakistan, this paper analyzes the impact of some significant macroeconomic variables on good governance using time series data for empirical analysis. In this paper, democracy, economic openness, population size, peace years, unemployment, exchange rate, budget deficit, life expectancy and educational levels are considered the major macroeconomic determinants of good governance. We have employed the concept of stationarity to solve the by using Augmented Dickey Fuller (ADF) test. By conducting the time series regression analysis, we found that the stated variables are affecting the degree of good governance according to their levels. Keywords: Governance; Rule of law; Government effectiveness; Corruption; Time Series Econometrics; Pakistan

I. Introduction
Good governance has gained significant attention in the world especially in the last decade. In recent years, good governance has attracted the attention of economists, political scientists, lawyers, politicians, national institutions, and institutions of World Bank and IMF. Since some empirical and theoretical controversies have been found on the concept and importance of good governance but it can be considered as a prerequisite for economic growth and development (Kaufmann and Kraay, 2002 and

Factors Affecting Good Governance in Pakistan: An Empirical Analysis

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2003). Governance can also be seen as the instrument of the effectiveness of a society’s institutions. If the institutions are appropriate and effective, the outcome should be good governance (Duncan 2003). Governance is the instrument of political, economic and administrative authorities to manage a nation's affairs. It is the diverse mechanisms, processes, relationships and institutions through which residents of country and groups communicative their benefits, exercise their rights and obligations and arbitrate their differences. In good governance countries, the working condition is generally more favourable for providing protection and guarantees for investors. Good governance is therefore a compartment of governance, wherein public capital and problems are managed effectively, efficiently and in response to vital needs of society. Effective elected forms of governance rely on public participation, accountability and transparency. There is an increasing amount of research on the factors that lead to good or bad governance in the world. Good governance creates a good environment for investment, including investment in people, and leads to higher income, reduces poverty, and provides better social indicators. According to UNDP, governance can be worked out as economic, political and administrative authorities to manage a country's affairs at all levels. It joints the systems, processes and institutions, through which residents and groups articulate their interests, put into affect their legal rights, meet their obligations and mediate their differences. More modern studies have pointed out that face-to-face...
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