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With regard to the increasing income inequality, higher unemployment rates, urbanization, economic inefficiency, lack of economic justice in different societies especially within developing countries, and highlighting the role of governments in achieving a better distribution of incomes, the need for good governance is strongly felt.  This study aims to examine the impact of the good governance on income distribution among the South-Western Asia countries during the period from 1996 to 2013. It estimates two panel data models using Stata12 software. In the first model, the index of good governance quality and in the second model, six indicators of good governance are investigated. The results show that the index of governance quality and the indicators of political stability and government effectiveness have negative and significant effects on reducing inequality. Thus, the proper policy-making may improve the distribution of income in these countries.

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The exchange rate overshooting, which results from the monetary disruptions, has negative impact on production and investment in the main economic activities and de-stabilizes the whole economy because of their input-output linkages. Therefore, identifying the causes of economic instability can help to adopt appropriate policies and to create economic stability in the country. The main question is to what extent the exchange rate can cause instability in the economy. To answer this question, first, the exchange rate overshooting was calculated using the Hodrick- Prescott filtering method during 1989-2012. Then, it was introduced into the model by specifying the generalized Solow production function, and finally, the production function was estimated for the main activities of the economy using the panel data technique. The results show that the impact of the exchange rate overshooting on the major economic activities is negative.