The relationship between foreign aid and corruption: a case of selected Asian countries
Abstract
Purpose
The purpose of this study is to examine the effect of foreign aid (FA) on corruption in selected Asian countries (Pakistan, India, Srilanka and Bangladesh) using the panel data from 2000 to 2014.
Design/methodology/approach
The author used Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests to check the stationary properties of the variables. The Pedroni’s and Kao panel cointegration approach was applied to analyze the variable’s long-run relationship. The author used panel dynamic ordinary least squares (PDOLS) and fully modified ordinary least squares (FMOLS) framework to estimate the coefficients of cointegrating vectors. Additionally, the panel granger causality test was performed to check the causal relationship between the variables.
Findings
The results from PDOLS and FMOLS indicate that FA has a significant negative impact on the level of corruption. This infers that the foreign assistance decrease the level of corruption perception index, hence, more corruption in the country.
Originality/value
Overall, the study fulfills the need to understand the aid-corruption nexus, particularly in the case of the Asian region.
Keywords
Citation
Ali, M., Khan, L., Sohail, A. and Puah, C.H. (2019), "The relationship between foreign aid and corruption: a case of selected Asian countries", Journal of Financial Crime, Vol. 26 No. 3, pp. 692-704. https://doi.org/10.1108/JFC-08-2018-0089
Publisher
:Emerald Publishing Limited
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