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

Craigwell, Roland and Wright, Allan S (2011): Foreign Direct Investment and Corruption in Developing Economies: Evidence form Linear and Non-Linear Panel Causality Tests. Forthcoming in:

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Panel Linear and Non-Linear Causality; Corruption; Foreign Direct Investment
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models

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