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Does More Corruption Lead to Higher Prices? An Empirical Analysis

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  • Marcus Vinicius Santos
  • Gabrielito Menezes

Abstract

This paper examines the existing relationship between inflation and corruption in a country-level panel data analysis from 2012 to 2021. Our findings are consistent with the existing literature, indicating a positive relationship between corruption and inflation. Specifically, inflation rates related to the real estate market were sensitive to increases in perceived corruption, indicating that this sector is subject to illicit practices and is an essential component of the countries’ inflationary basket. Furthermore, when we examine the behavior of past economic freedom on current inflation, we see similar and even more significant increases in inflation, which indicates corruption has a long-term effect. Finally, there is evidence that a country’s income level is related to perceived corruption levels, with poorer countries experiencing higher levels of corruption and richer countries experiencing lower levels. A country’s income level is frequently related to its cultural background and the regional subgroup it belongs to. According to this metric, Northern and Western Europe, North America, Australia, and New Zealand had the lowest levels of perceived corruption.

Suggested Citation

  • Marcus Vinicius Santos & Gabrielito Menezes, 2024. "Does More Corruption Lead to Higher Prices? An Empirical Analysis," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 16(11), pages 1-66, November.
    • Handle: RePEc:ibn:ijefaa:v:16:y:2024:i:11:p:66
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    References listed on IDEAS

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    1. Hasim Ak a & Ahmet Yilmaz Ata & Coskun Karaca, 2012. "Inflation and Corruption Relationship: Evidence from Panel Data in Developed and Developing Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 281-295.
    2. Al-Marhubi, Fahim A., 2000. "Corruption and inflation," Economics Letters, Elsevier, vol. 66(2), pages 199-202, February.
    3. Antonis M. Koumpias & Jorge Martinez-Vazquez & Eduardo Sanz-Arcega, 2015. "Housing Bubbles and Zoning Corruption: Evidence from Greece and Spain," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1505, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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