EXAMINING THE RELATIONSHIP BETWEEN INSTITUTIONS, GDP, TRADE, FDI, AND HUMAN DEVELOPMENT IN BANGLADESH: AN ARDL APPROACH

Aims: This study examines the impact of Institutional quality, GDP, trade, and FDI on human development in Bangladesh from 1996 to 2022. Methodology: An autoregressive distributed lag (ARDL) model is used to analyse short-run and long-run relationships. Institutional quality is measured using three different indexes. Additionally, the Toda-Yamamoto Granger causality test is conducted to explore causal links. Results: Institutional quality has a negative and significant long-run impact on human development, while GDP and trade have positive and significant long-run effects. However, the short-run impacts of GDP and trade are negative and significant, whereas all other short-run coefficients are insignificant. In all three models, the error correction term is negative and falls between 0 and 1, indicating that the system moves back toward equilibrium following short-term shocks. The ARDL bounds test does not provide conclusive evidence of a long-run relationship among the variables. The three models reveal consistent bidirectional and unidirectional causal links, each showing two bidirectional and six unidirectional relationships. Conclusion: Bangladesh experiences "development without governance," where economic growth and trade drive progress, but weak institutions hinder long-term human development. Strengthening governance is crucial to ensure sustainable development.