Studying the control of corruption effects on inflation
Yazdan Naghdi, Soheila Kaghazian and Nasibeh Kakoei
Department of Economics, Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran
Abstract
This study examines the control of corruption effects on inflation in both advanced countries (Austria, Canada, Denmark, France, Germany, Italy, Spain, Switzerland, United Kingdom and United States) and Emerging countries (Argentina, Brazil, China, India, Indonesia, Malaysia, Mexico, Russian Federation, Thailand and Turkey) over the (1996 -2010) period. Statistical data relating to the control of corruption index have been given from Wgi and statistical data for other variables have been given from economic indicators of World Bank. To gain this goal control of corruption index is used for measuring corruption in the form of a dynamic econometric model and by using panel cointegration techniques. The results of this study imply that the control of corruption in Advanced and Emerging countries has a significant and negative correlation with inflation rate but the significance level is very low in advanced countries, so in both countries group by controlling corruption, inflation will decrease. In addition, the relationship between inflation and unemployment in both countries group is negative and significant, which means that with rising unemployment, inflation will be reduced in these countries, in other words, short-term Phillips curve is the same for both groups of countries. Results imply positive and significant relationship between inflation and expected inflation in both groups. Among the variables in the model, expected inflation has the greatest effect on inflation in both countries group.
Keywords: Control of Corruption Index, Inflation, Phillips Curve, Panel cointegration.
JEL: O43, O130, E31, E24
Corresponding Author: Dr. Yazdan Naghd,i Assistant Professor of Economics, Department of Economics, Firoozkooh Branch, Islamic Azad University, Firoozkooh, Iran.