The Impact of Corruption on Economic Growth in SAARC Countries

Abstract

The corruption is the issue that is frequently perceived as unfavorable to economic growth. This study addresses the econometric shortcomings of the literature and provides an estimate the impact of corruption on economic growth rates over the years 1995-2014. This research reports the econometric limitations of the literature and offers an evaluation of corruption impact on the economic growth rates over the years 1995-2014. The research is showed with a regression on a sample of 5-member countries of South Asian Association for Regional Cooperation (SAARC) and four variables (Corruption, Foreign Direct Investment, Government Expenditure, Population Growth). The models of study are built on the endogenous growth theory to analyze the relationships. Outcomes using economic freedom index (EFI) shows that corruption has a negative impact of economic growth in the SARRC countries.