Economic Modelling

Volume 35, September 2013, Pages 622-633

Does corruption impede economic growth in

Pakistan?
Author links open overlay panelAbdulFarooq MuhammadShahbaz MohamedArouri FrédéricTeulon
ab ab c d

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https://doi.org/10.1016/j.econmod.2013.08.019Get rights and content

Highlights
•
Corruption impedes economic growth.

•
Financial development and trade openness add in economic growth.

•
The feedback effect between corruption and economic growth

•
The bidirectional causality exists between trade openness and
corruption.

Abstract
The present study reinvestigates the impact of corruption on economic growth
by incorporating financial development and trade openness in growth model
 in case of Pakistan. We have used time series data over the period of 1987–
2009. We have applied structural break unit root test to test the integrating
order of the variables. The structural break cointegration has also been
applied to examine the long run relationship between the variables.

The long run relationship between the variables is validated in case of

Pakistan. We find that corruption impedes economic growth. Financial
development adds in economic growth. Trade openness stimulates economic
growth. The causality analysis has exposed the feedback effect between
corruption and economic growth and same inference is drawn for trade
openness and corruption. Trade openness and economic growth are
interdependent. Financial development Granger causes economic growth
implying supply-side hypothesis in case of Pakistan.

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Keywords
Corruption
Growth
Pakistan
Copyright © 2013 Elsevier B.V. All rights reserved.

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