Hira MUJAHID* and Shaista ALAM**
Now a days, it is debated that why some countries are facing great macroeconomic volatility and the crises. The basic reasons of dreadful macroeconomic performance and the volatility is due to poor quality of institutions and unnecessary government spending, high inflation, and mismanaged exchange rates. This study investigates the relationship between institutional quality, human capital and volatility of economic output; and uses various indicators of institutional quality. The sample includes a panel of 140 open economies, subject to the availability of data covering annual time period from 2002 to 2014. The results propose that greater institutional quality increases economic performance and reduces the output volatility in the economy.
Key Words: Macroeconomic Volatility, Economic Performance, Quality of Instituions