The Corruption-Inflation Nexus : Evidence from Developed and Developing Countries

In this paper, we analyze the relationship between corruption and inflation for a sample of 100 developing and developed countries representing five regions (the Americas, Europe, the Middle East and North Africa, Sub-Saharan Africa and Asia Pacific) over the period of 2000 to 2012. We perform various model estimations using alternative techniques and two indicators of corruption. Our results provide robust evidence suggesting that corruption causes inflation. Estimation outcomes for the overall sample and for region subsamples confirm our findings with discrepancies across regions regarding the corruption-inflation nexus. With respect to other macroeconomic variables, the empirical results are consistent with theory for all specifications but indicate a number of disparities across regions