Institutional Quality and Economic Growth: Evidence from Morocco

This study examined the impact of institutional factors on economic growth in Morocco. It analysed the impact of institutional quality index on economic growth in Morocco. The study conducted an empirical analysis to quantify the impact of institutional quality on economic growth over the period 1996 - 2021 by employing two-stage least squares (2SLS). This study assessed Morocco's institutional quality, using six indicators and constructed an Institutional Quality Index (IQI) via principal component analysis (PCA). Regression analysis revealed urbanisation and population growth as positive drivers of economic expansion. However, the public sector's growth relative to GDP showed a negative relationship with GDP per capita, indicating potential inefficiencies. Higher institutional quality positively impacted economic growth, highlighting transparent regulatory frameworks' importance. Incorporating institutional quality into the analysis enhanced our understanding of investment's role in economic growth, with institutional quality amplifying the positive effects of gross fixed capital formation (GFCF). This study recommended policy measures to enhance Morocco's economic development. Firstly, targeted reforms are needed to address institutional quality's impact on economic performance. Secondly, enforcing robust rule of law frameworks can boost investor confidence. Lastly, transparent regulations can attract investment for sustainable growth.