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Foreign Direct Investment and Corruption in Developing Economies: Evidence form Linear and Non-Linear Panel Causality Tests

  • Craigwell, Roland
  • Wright, Allan S

This paper aims at determining the causal relationship between FDI and corruption in 42 developing countries using linear and non linear panel methods over the period 1998 to 2009. The findings show a causal association as corruption appears to Granger caused FDI and FDI seems to Granger lead corruption using linear methods, while for weaker results are obtain using non linear methods. The general value of these results is that adequate institutional facilities must be in place in developing economies to reduce losses from corruption especially in an attempt to attract foreign direct investment.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40933.

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Date of creation: 2011
Date of revision:
Handle: RePEc:pra:mprapa:40933
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  1. 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.
  2. Razafindrakoto, Mireille & Roubaud, Fran├žois, 2010. "Are international databases on corruption reliable? A comparison of expert opinion surveys and household surveys in sub-Saharan Africa," Economics Papers from University Paris Dauphine 123456789/4352, Paris Dauphine University.
  3. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
  4. Aidt, T.S., 2009. "Corruption, Institutions and Economic Development," Cambridge Working Papers in Economics 0918, Faculty of Economics, University of Cambridge.
  5. Ritva Reinikka & Jakob Svensson, 2005. "Fighting Corruption to Improve Schooling: Evidence from a Newspaper Campaign in Uganda," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 259-267, 04/05.
  6. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  7. repec:oup:qjecon:v:110:y:1995:i:3:p:681-712 is not listed on IDEAS
  8. Nobuo Akai & Yusaku Horiuchi & Masayo Sakata, 2005. "Short-run and Long-run Effects of Corruption on Economic Growth: Evidence from State-Level Cross-Section Data for the United States," CIRJE F-Series CIRJE-F-348, CIRJE, Faculty of Economics, University of Tokyo.
  9. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
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