Relationship between corruption and foreign capital: Panel data analysis

In this study, the relationship between corruption and foreign capital flows is examined. According to theoretical studies, corruption can affect economic functioning negatively or positively. Corruption can cause waste of resources or accelerate economic activities by accelerating bureaucratic work. He prefers countries where he thinks he can earn foreign capital. Therefore, the severity of corruption may affect foreign capital flows. In this context, the study was carried out between 2000 and 2016 and selected 35 countries. In this study, panel regression analysis and Granger causality test methods were used. As a result of the panel regression analysis, it has been concluded that the increase in corruption for 35 countries constituting the model positively affects foreign direct investments and negatively affects total foreign capital investments. There is no statistical relation between corruption and portfolio investments. The results of Granger causality test show that there is no causality relationship between corruption and total capital, there is a one way causality relationship from corruption to foreign direct investments and there is a bidirectional causality relationship between corruption and portfolio investments. It is concluded that corruption has no effect on all types of foreign capital. The strongest relationship was found between corruption and foreign direct investment.