Macroeconomic effects of the rule of law

While the concept of the rule of law is the subject of academic debates, it is also a term used by the media and society regarding the proper functioning law and justice system. The concept is frequently used, especially in discussions about economics, and is presented as a recipe for most macroeconomic problems. On the other hand, although there is no clear definition of the rule of law agreed upon in academic circles, the lack of a strict and the institutionalized rule of law in public debates is pointed out as the reason for any disruption in the legal system. An environment of mutual trust is needed to continue and develop economic, commercial, and financial activities on a local and global scale. In this context, it is emphasized that the rule of law is also essential for healthy economic functioning due to national and international legal rules and compliance. The concept of subjectivity in the definition of the rule of law restricts it in measurement and being the subject of empirical analysis. Despite these difficulties, some institutions and organizations define and measure the rule of law and create indices. In our study, first of all, the relationship between law and economy was examined, then the concept of the rule of law was explained, and the theoretical and empirical literature on its relationship with selected macroeconomic indicators was reviewed. In this context, information is given about the definition and measurement of the World Justice Project and the World Bank rule of law indices. In the analysis part of the study, estimates were made with panel data methods in order to examine how the economic growth, interest rates, inflation rates, financial development, and foreign investments, which were selected according to the criteria of representing the macroeconomic process and having been studied in the literature, are affected by the rule of law.