Time stability of the impact of institutions on economic growth and real convergence of the EU countries: implications from the hidden Markov models analysis

Research background: It is not straightforward to identify the role of institutions for economic growth. The possible unknown or uncertain areas refer nonlinearities, time stability, transmission channels, and institutional complementarities. research problem tackled in this paper analysis stability relationship between growth real convergence.
 Purpose article: article aims verify whether impact environment on GDP dynamics was stable over diffed various subperiods. covers EU28 countries 1995?2019 period.
 Methods: We use regression equations with dummies interactions assess based partially overlapping observations. models are estimated Blundell Bond?s GMM system estimator. results then averaged Bayesian Model Averaging (BMA) approach. Structural breaks identified basis Hidden Markov Models (HMM).
 Findings & value added: added study threefold. First, we HMM approach find structural breaks. Second, BMA method applied robustness outcomes. Third, show potential foresighting. estimates indicate that good institution reflected greater scope freedom better governance lead higher EU countries. However, time.