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Foreign direct investment and corruption in developing economies: Evidence from linear and non-linear panel Granger causality tests

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  • Roland Craigwell

    ()
    (Department of Economics, University of the West Indies, Cave Hill Campus)

  • Allan Wright

    ()
    (Department of Economics, University of the West Indies, Cave Hill Campus)

Abstract

This paper determines the causal link between FDI and corruption in 42 developing countries using linear and non linear panel Granger causal methods over the period 1998 to 2009. The findings show that the outcome of the causal association depends on the method used. The linear panel methods revealed that the majority of the markets indicate a bidirectional causal link between FDI and corruption while in contrast, for the nonlinear tests, the link from FDI to corruption dominates.

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File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P206.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 3 ()
Pages: 2272-2283

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Handle: RePEc:ebl:ecbull:eb-11-00234

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  1. David I. Harvey & Stephen J. Leybourne, 2007. "Testing for time series linearity," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 10(1), pages 149-165, 03.
  2. Campos, Nauro F & Dimova, Ralitza & Saleh, Ahmad, 2010. "Whither Corruption? A Quantitative Survey of the Literature on Corruption and Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8140, C.E.P.R. Discussion Papers.
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  6. Nair-Reichert, Usha & Weinhold, Diana, 2001. " Causality Tests for Cross-Country Panels: A New Look at FDI and Economic Growth in Developing Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 63(2), pages 153-71, May.
  7. Moore, Winston & CRAIGWELL, ROLAND, 2008. "Foreign direct investment and tourism in SIDS: evidence from panel causality tests," MPRA Paper 33438, University Library of Munich, Germany.
  8. Venet, Baptiste & Hurlin, Christophe, 2001. "Granger Causality Tests in Panel Data Models with Fixed Coefficients," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6159, Paris Dauphine University.
  9. Feige, Edgar L & McGee, Robert T, 1977. "Money Supply Control and Lagged Reserve Accounting," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 9(4), pages 536-51, November.
  10. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(3), pages 1320-1346, September.
  11. Roland Craigwell & Allan Wright, 2011. "Foreign direct investment and corruption in developing economies: Evidence from linear and non-linear panel Granger causality tests," Economics Bulletin, AccessEcon, vol. 31(3), pages 2272-2283.
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Cited by:
  1. Roland Craigwell & Allan Wright, 2011. "Foreign direct investment and corruption in developing economies: Evidence from linear and non-linear panel Granger causality tests," Economics Bulletin, AccessEcon, vol. 31(3), pages 2272-2283.

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