SAARC Economies in Focus: How Corruption Shapes Economic Growth Trajectories

Abstract

This study examines the impact of corruption on selected SAARC countries' economic growth. This study is critical because it is carried out in selected SAARC countries and investigates whether economic growth has positively or negatively impacted corruption. A data panel from 2012-2021 was collected to analyze the selected SAARC economies for that purpose empirically. For empirical research, the real GDP per capita is considered dependent. At the same time, the corruption index is constructed to measure the intensity of corruption and to evaluate the models using variables such as the formation of gross fixed capital, total workforce, the levels of accountability, tax revenues, openness to trade and inflation. Individual national analyses have shown a link between corruption and economic growth, and that corruption is also detrimental to growth on an individual country basis. Therefore, instead of finding co-integration, this study followed previous panel data research and conducted the empiric analysis with some famous econometric techniques like FAXE (Fixed Effect) and the Random Effects (RE) model later on. Specification of Hausman The test is used to determine which test results for this study are more favourable. Hausman's test showed the reliability of fixed effects rather than random effects by denying the null hypothesis. Few variables, such as corruption and liability, are limited in nature in this study. The hypothesis of "sand the wheels" favors Hausman-Taylor regression. The rates of economic progression are affected by corruption in selected SAARC countries. Some other variables, such as accountability and the status of law and order, may help drive economic growth. The suggestion is to work on the awareness of the threat of corruption by selected SAARC countries since non-corruption economies can track progress faster.