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

Author

Listed:
  • 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.

Suggested Citation

  • 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.
  • Handle: RePEc:ebl:ecbull:eb-11-00234
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I3-P206.pdf
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    References listed on IDEAS

    as
    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.
    2. Campos, Nauro F & Dimova, Ralitza & Saleh, Ahmad, 2010. "Whither Corruption? A Quantitative Survey of the Literature on Corruption and Growth," CEPR Discussion Papers 8140, C.E.P.R. Discussion Papers.
    3. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    4. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    5. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    6. repec:dau:papers:123456789/6159 is not listed on IDEAS
    7. David I. Harvey & Stephen J. Leybourne, 2007. "Testing for time series linearity," Econometrics Journal, Royal Economic Society, vol. 10(1), pages 149-165, March.
    8. 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, vol. 63(2), pages 153-171, May.
    9. Greenidge, Kevin & Drakes, Lisa & Craigwell, Roland, 2010. "The external public debt in the Caribbean Community," Journal of Policy Modeling, Elsevier, vol. 32(3), pages 418-431, May.
    10. Feige, Edgar L & McGee, Robert T, 1977. "Money Supply Control and Lagged Reserve Accounting," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(4), pages 536-551, November.
    11. 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.
    12. Hood, M. V. & Kidd, Quentin & Morris, Irwin L., 2008. "Two Sides of the Same Coin? Employing Granger Causality Tests in a Time Series Cross-Section Framework," Political Analysis, Cambridge University Press, vol. 16(3), pages 324-344, July.
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    Citations

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    Cited by:

    1. Mosikari, Teboho Jeremiah & Nthebe, Tselane Confidence & Eita, Joel Hinaunye, 2018. "Does corruption hampers inward FDI in South Africa from other African countries? a gravity model analysis," MPRA Paper 88735, University Library of Munich, Germany, revised 10 Jul 2018.
    2. Roberto Antonietti & Jasmine Mondolo, 2018. "Does inward FDI influence the quality of domestic institutions? A cross-country panel analysis," Papers in Evolutionary Economic Geography (PEEG) 1842, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Dec 2018.
    3. 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.

    More about this item

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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