The Moderating Effect of Cultural Influence on Governance and the Economy
Shahrin Saaid Shaharuddin, Azni Zarina Taha, Mozard Mohtarc,
Yeney Widya Prihatiningtias, Hanafi Husin
This study aims to investigate the moderating effects of cultural influence on the relationship between governance indicators and the economic capability of countries by using cultural influence factors developed by the Lowy Institute and a newly developed governance index using principal component analysis based on World Governance Indicators. The cultural influence indicators that were used in the study include a composite score for cultural influence as well as three cultural influence sub-measures. The cultural influence factors and sub-measures were extracted from the Lowy Institute Asia Power Index whilst World Governance Indicators sub-measures were taken from the World Bank database based on annual data from 2018 to 2022. This study attempts to contribute to the existing body of literature by analyzing the moderating effect of cultural influence on the relationship between governance and the economy using cultural influence factors developed by the Lowy Institute and the newly created governance index. Results from the fixed-effects and random-effects regression suggest that cultural influence has a positive moderating effect on the relationship between governance and the economy. Also, the complex and nuanced effects of cultural influence sub-measures on the relationship between governance and the economy were evidenced by positive effects and supported previous findings by Khan (2010), Norris and Inglehart (2011), and others. The results from the study indicate that cultural influence has important implications for strategies for researchers, policymakers, and practitioners. and highlights the importance of managing information flows when developing policies and strategies.
Keywords: Cultural influence, Governance indicators, Economic capability, Lowy institute, Worldwide governance indicators
