Corruption-Growth Nexus in SAARC Nations: A Panel Autoregressive Distributed Lag Model (ARDL) Landscape

Abstract

Purpose: This study aims to analyze the dynamic impact of corruption on the economic growth of SAARC nations (Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Srilanka) using the data between 2002-2022. This study is also devoted on the determination of the impact of foreign direct investment and trade of coastal countries on the overall economic growth of SAARC nations.

Research Methods: It employed panel ARDL (Autoregressive Distributed Lag) method without location dummy, with location dummy and, with interaction variables such as coastal FDI (Foreign Direct Investment) and coastal TR (Trade) along with the Dumitrescu-Hurlin (D-H) test of causality to explain the nature of data econometrically.

Results: Results of the findings show that corruption does not have any significant effect on the economic growth of SAARC nations in the short-run, however, corruption has found to impede the economic growth in the long-run significantly. One unit increase in control of corruption leads economic growth to decrease by 45.09 units and 22.91 units respectively (with dummy and with interaction variables). Moreover, the GDPPC (Gross domestic product per capita) of coastal countries is found to be 653.93 units more than that of landlocked countries. D-H test result shows the existence of no causal relationship between economic growth and corruption in the short-run, but corruption has a bidirectional causal relation with dependency ratio.

Implications: The paper will provide a fruitful enquiry both in theory and methodology for researchers, academicians, and students to further their studies in the same field.

Originality: It stands for a theoretical basis and strategies founded on the analyzed links between the variables.