Corruption, Political Instability and Economic Development in the Economic Community of West African States (ECOWAS): Is There a Causal Relationship?

Abstract

Despite the abundant research on economic development, corruption and political instability, little research has attempted to examine whether there is a causal relationship among them. This paper examines the causal relationship among corruption, political instability and economic development in the ECOWAS using the Granger causality test within a multivariate cointegration and error-correction framework for the 1996-2012 period. The findings indicate that political instability Granger-causes economic development in the short term, while political instability and economic development Granger-cause corruption in the long term. In addition, we employed the forecast error variance decomposition and impulse response function analyses to investigate the dynamic interaction between the variables. The results demonstrate positive unidirectional Granger causality from political instability to economic development in the short term and positive unidirectional Granger causality from political instability and economic development to corruption in the long term in ECOWAS countries. Thus, ECOWAS governments should employ policies to promote political stability in the region.

The interactive impact of press freedom and media reach on corruption

“…Researchers have confirmed that corruption increases with political instability (Lederman et al, 2005;Leite and Weidmann, 1999;Park, 2003). Abu et al (2015) examines the causal relationship among corruption, political instability, and economic development in ECOWAS countries within a multivariate cointegration and errorcorrection framework. They find that many years of political instability have contributed to the high rate of corruption and underdevelopment in ECOWAS countries.…”

Effect of corruption and political instability on enterprises’ innovativeness in Ethiopia: pooled data based

“…H2: Political instability has negative effect on enterprises' innovativeness Rising corruption and political instability contribute to underdevelopment through adversely affecting government revenue, production, savings, investment, growth, and income distribution in West Africa (Abu et al, 2015). Alonso and Garcimartín (2013) identified that corruption reduces enterprises' innovativeness through increasing distrust and uncertainty in governmental institutions and the entire business environment.…”

Corruption, Political Instability and Sustainable Development: The Interlinkages

“…Corruption has perilous implications for the economies but in developing economies it particularly has detrimental impacts on socioeconomic indicators. In various forms it retards economic growth (Tanzi & Daveoodi, 1998;Mo, 2001;Meon & Sekkat, 2005;Venard, 2013), destabilize governments (Mbaku & Paul, 1989;Abu, Karim & Aziz, 2015), harms foreign direct investment (Habib & Zurawicki, 2002), decreases public and private sector investment (Alesina & Perotti, 1996;Meon & Sekkat, 2005;Mo, 2001), reduces human capital (Mo, 2001), increases poverty (Gupta, Davoodi & Alonso-Terme, 2002) and adversely affects sustainable development (Dietz, Neumayer & De Soysa, 2007;Aidt, 2010;Venard, 2013). However, the corruption may promote economic growth, the idea stems from Leff (1964) and Huntington (1968).…”

“…Political instability creates political and bureaucratic corruption. Politically weak governments bribe their rivals and bureaucrats to sustain their governments which penetrate to the gross root level (Abu, Karim & Aziz, 2015). The magnitude of political instability directly and proportionally affects the degree of corruption in the economies (Park, 2003).…”