Foreign direct investment and corruption in developing economies: Evidence from linear and non-linear panel Granger causality tests

Abstract

This paper determines the causal link between FDI and corruption in 42 developing countries using linear and non linear panel Granger causal methods over the period 1998 to 2009. The findings show that the outcome of the causal association depends on the method used. The linear panel methods revealed that the majority of the markets indicate a bidirectional causal link between FDI and corruption while in contrast, for the nonlinear tests, the link from FDI to corruption dominates.