governance, oil price, and economic growth: the case of ecuador

Ecuador is a developing country that faces an economic and financial crisis every time the price of oil falls. Therefore, determining the variables that have an impact on economic growth is of a high importance. Prior studies show that governance and inequality influence economic growth. By using a vector autoregressive model, the main goal of this research is to analyze the effect of the price of oil and governance on economic growth. The findings show governance has a positive effect on GDP but it is not of a huge magnitude. On the other hand, in the case of oil exporting countries, a positive shock in the oil price leads a negative and significant effect on GDP.