CORRUPTION, POLITICAL INSTABILITY AND ECONOMIC GROWTH: EVIDENCE FROM PANEL DATA

Abstract

Corruption has been an issue of major political and economic significance in Africa. The expectation that democracy offers a potential route to dealing with the developmental bottleneck of the region, has led to a resurgence of interest in analyzing the nexus between corruption, political instability and economic growth. This study examined these crucial links for seven West African countries considered as the hot-spot of the region from 2002-2018 using panel cointegration, panel dynamic OLS and causality. The results from the panel cointegration shows evidence of long run relationship between corruption, political instability and economic growth. The result of the panel dynamic OLS shows a negative and significant relationship between index of political instability and index of corruption. Also, the result from the Granger-causality shows evidence of unidirectional causality running from corruption and political instability to economic growth. Based on the result that emanated from this study, we suggest a critical need for politically fragmented states with high level of political instability to address the underlying problem that paved the way for conflict through concerted effort. This can be achieved through the design and implementation of policies that will address structural imbalances in the socio-economic and political space of the countries experiencing conflict. Also, corruption can be curbed or minimize by enhancing the quality of governance through intense institutional reform for better economic outcomes.