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The Consequences of Corruption on Inflation in Developing Countries: Evidence from Panel Cointegration and Causality Tests

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  • Şerife Özşahin

    () (Department of Economics, Necmettin Erbakan University, Konya 42090, Turkey)

  • Gülbahar Üçler

    () (Department of Economics, Ahi Evran University, Kırsehir 40100, Turkey)

Abstract

Up until the 1980s, studies on corruption were dominated by disciplines of public administration and sociology. In the following years, however, economists have also provided a good amount of research on this issue. According to Transparency International Agency, corruption, which has a negative impact on most macroeconomic indicators, is “the abuse of entrusted power for private gain”. Even though the disruption of corruption causing weak growth and investment rates has long been examined, there is little evidence regarding its impact on inflation. In this study, the nexus between corruption and inflation was investigated for 20 countries over the period 1995–2015. Estimation results indicated that high corruption increased inflation rates, and that there was a unidirectional causal relationship from corruption to inflation for ten countries in the sample.

Suggested Citation

  • Şerife Özşahin & Gülbahar Üçler, 2017. "The Consequences of Corruption on Inflation in Developing Countries: Evidence from Panel Cointegration and Causality Tests," Economies, MDPI, Open Access Journal, vol. 5(4), pages 1-15, December.
  • Handle: RePEc:gam:jecomi:v:5:y:2017:i:4:p:49-:d:122367
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    References listed on IDEAS

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    Keywords

    corruption; inflation; heritage foundation; panel data analysis;

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • F - International Economics
    • I - Health, Education, and Welfare
    • J - Labor and Demographic Economics
    • O - Economic Development, Innovation, Technological Change, and Growth
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

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