Does Corruption Grease or Sand the Wheels of Economic Growth in Ghana? An ARDL Bounds Test

Abstract

This paper seeks to ascertain the relationship between corruption and economic growth in Ghana using time-series secondary data for the period 1984-2016. We employ autoregressive distributed lags (ARDL) model to estimate the long-term relationship between corruption and economic growth in Ghana. Corruption is estimated to have a significant negative effect on per capita growth both in the short-term and long-term. While trade openness shows a positive effect on growth, inflation and capital formation show a significant negative influence on growth. We find the variables to be cointegrated and both the long-run and short-run parameters provide evidence of a negative relationship between corruption and economic growth. While capital formation and inflation also show negative effect on growth, trade openness shows a positive effect. The government should endeavour to effectively combat the destructive phenomena of corrupt practices that weaken the institutional quality through the adoption of functional regulatory measures. Transparency of governmental functions should be enhanced through the active involvement of citizens in governance as well as minimizing the discretion at the disposal of bureaucrats. Contribution/Originality: This paper contributes to the existing literature by introducing corruption in an endogenous growth model in the context of Ghana. The paper is the first attempt to employ unique Ghanaian data to estimate the long-term effects of corruption on economic growth, a focused evaluation than has been previously done. of political and economic systems. Its definition streams from the broad terms of "misuse of public power" and "moral decay" to strict legal conceptualization as an act of bribery involving a public servant and a transfer of tangible resources (Andvig, Fjeldstad, Amundsen, Sissener, & Soreide, 2000). The Transparency International refers to corruption as "the abuse of entrusted power for private gain" (Kolstad, 2008). The World Bank also

The corruption and sustainable development nexus in Africa: a contemporary review and analysis

“…For East Africa, some empirical results by Jama (2021), for example, showed that corruption has a negative effect on economic development with a finding that a 1% decline in CoC will lead to a -0.6407% increase in economic growth. For Ghana, using data covering the period 1984 to 2016, Antwi et al (2020) reveal a significant negative relationship between corruption and economic growth in both the short-run and the long-run. They determined that:…”

“…[…] a change in corruption results in a corresponding negative change of 60[%] in growth in the long-term. In the short-term, a change in corruption results in a corresponding negative change of 82[%] in growth (Antwi et al. , 2020, p. 174).…”