A Moderating Role of Hierarchy of Institutional Hypothesis in Debt-Poverty Relationship: Empirical Evidence from OIC Member Countries
Keywords:Poverty, Public debt, Political Institutions, Economic Institutions, Hierarchy of Institutional Hypothesis, OIC Member Countries
A plethora of studies deciphered the moderating role of institutional performance in debt-growth and growth-poverty relationship but moderating role of hierarchy of institutional hypothesis in debt-poverty link has not been explored yet. This study is an endeavor to bridge this gap by exploring whether hierarchy of institutional hypothesis moderates the debt-poverty link in the Organization of Islamic Cooperation (OIC) member countries or not during 1996 to 2018. The findings of system GMM estimator disclose that public debt negatively associates with poverty alleviation in OIC member countries. The empirical results backing the notion that the performance of political and economic institutions augment the poverty alleviation. The outcomes also bolster the hypothesis that political institutions are the ones that really modify the course of events. Economic institutions undoubtedly contribute to reducing poverty, but this is only possible in the presence of political institutions. Our study reveals that an average level of political and economic institutional performance lessens the detrimental effects of public debt on poverty alleviation. According to the study's conclusions, the very first Sustainable Development Goal (SDGs), the reduction of poverty by 2030, seems implausible to be achieved given the current tendency of public debt in OIC member countries. In order to reduce the prevalence of poverty in OIC member nations, it is therefore suggested that institutional performance appraisal be linked with a decrease in public debt accumulation.
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