Corruption and Macroeconomic Performance in Nigeria: Evidence from Vector Autoregression Model

Abstract

This paper attempt to investigate how rent-seeking behaviour that is transmitted through weak institution and monopoly rent is perceived as corruption. The study adapts the rent-seeking theory into aggregate macro model with a Keynesian appeal as a framework. Having satisfied stationarity and the cointegration test, the paper used the Vector Autoregressive technique to decompose the variance in the measuring short and long-run forecast and by extension impulse response function was use to determine the impulse response function. The paper finds that in the short-run corruption is self perpetuating, however in the long-run this self perpetuating tendency
spill-over to public capital expenditure. Also long-run public debt tends to contribute more to corruption which signifies that part of public borrowing to finance deficit are likely to be underutilized or perhaps it is channel into other sub-optimal use which doesn’t represents the intended target. Rent seeking behavioural tendency are embedded in economic agents that bid and implement capital government projects. Due to weak institutional framework that might not enforce strict regulation in conducting government business, individuals and firms tends to partake in rent seeking. However the result shows that the economic growth responds to this
corrupt tendency gradually. The paper concludes that corruption responds more to both public debt and government capital expenditure than unemployment and growth process. As such weak institutional structures embedded in the public domain incentivize corruption to be persistent