Investigation of the Impact of Corruption on Inflation Rate in Selected MENA Countries

This study investigates the impact of corruption on inflation rate in selected MENA countries over the 1996-2013. We apply base model presented by Al-Marhubi (2000), Vindelynand Hillman (2007) and Damir and Praksa (2011). The estimation results of non-linear Panel Smooth Transition Regression model strongly reject the linearity hypothesis, and estimates two regimes that gives a threshold at corruption of -1.26 for under review countries. The key results show that the effect of the corruption, GDP per capita and openness is negative and show the intensity of them are high in high levels of calculated threshold for corruption. Other results of research report the existence of positive effects of government consumption expenditure and liquidity on inflation rate. Moreover, the results of many done studies about positive effects of government consumption expenditure and liquidity and also negative effects of control of corruption index, GDP per capita and openness on inflation rate are confirmed in this study. As the intensity of negative effect of control of corruption on inflation rate increasing simultaneous with increasing control of corruption.