Abstract

Corruption has been increasingly recognized as the major threat to economic development, political stability and peace. It is also acknowledged by the international community as the breeding ground for terrorism. This paper studies the relationship between corruption and terrorism in the long run. Previous studies examining the link between these two phenomena used only time series cointegration tests. In this paper, we consider a dataset for a panel of 123 developed and developing countries over the period 2003-2014. We use Pedroni’s residual-based panel cointegration test and the error correction model-based panel cointegration test developed by Westerlund. In order to obtain more robust results, two different measures of corruption are utilized which are Corruption Perceptions Index (CPI) and Worldwide Control of Corruption Indicator (CC). The results of both tests reject the null hypothesis of no cointegration. we conclude that corruption and terrorism converge. Our findings corroborate results of previous studies.

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