Asymmetric Impact of Corruption on the Economic Growth in Pakistan. Analysis with Non-Linear ARDL Model

Abstract

This study used the following model to investigate the relationship between economic growth and independent variables such as trade globalization and corruption in Pakistan throughout the period of time spanning from 1990 to 2021. This study used the PP and ADF tests to examine the stationarity of the variables at level and first difference. The findings demonstrate that economic growth is stationary at level and at first different as per the findings of the ADF and PP tests respectively. On the other side the findings indicate that corruption and trade globalization variables are not stationary at level but these variables become stationary at first difference that confirm that asymmetric ARDL model can be used with the dataset. Further the findings of the long run asymmetric ARDL results are indicated in the above table. The findings demonstrate that 1 % positive increase in corruption in the long run causes to decrease the economy growth of Pakistan about -0.44 % while 1% negative shock in the corruption causes to increase the economy growth by 0.61 % per year. Both positive and negative shocks in corruption indicates statistically significant impact on the economy growth of Pakistan. On the other hand, the findings of the long run asymmetric ARDL indicates that positive shock in trade globalization has positive and statistically significant impact on the economy of Pakistan while negative shock has negative and significant impact on the growth of Pakistan economy.