corruption; economic growth; economic development; GDP growth; Armenia; transition economies
To determine the relationship between corruption and economic growth variables, we undertake a general analysis of those relationships for 39 countries over an eleven year period. Since the data on corruption specific to Armenia are insufficient for an econometric analysis, we undertake a case study of that country to illuminate the relationships determined by the empirical analysis. We find corruption to be a hindrance for overall economic performance, since there is a strong negative correlation between corruption indices and real per capita GDP. Regressing real Foreign Direct Investment on corruption, however, we found no strong relationship between the two. Nor is there evidence that high levels of corruption limit international trade. Imports of goods and services increase as corruption does. As a country's business increases in terms of foreign trade and FDI, increased opportunities are provided for corrupt officials. Since 200, Armenia's corruption indices have declined consistently, showing poor performance, and its ranking among other nations has continued to fall. Nevertheless, FDI has continued to increase in that period of strong economic growth. Other performance indicators demonstrate a very healthy macro economy not apparently troubled with the effects of corruption.