Empirical Analysis of Corruption Levels on Rising Central Government Debt

Abstract

Limiting central government debt is a crucial objective of numerous governments around the world and it is often looked to as a way to both increase the financial health of the country and prevent significant economic collapse. One way that countries can address this systemic issue of rising central debt is to look at curtailing corruption within their borders. This thesis looks to examine the effects of corruption on rising central government debt and to illustrate that the higher the level of corruption is in a country, the more central government debt that country will hold. Throughout this thesis I examine the relationship between variables of government accountability and how they correlate with central government debt. The research I conducted illustrates that there is indeed a relationship between central government debt and level of corruption within a country. This relationship provides evidence that as the level of corruption and overall lack of transparency increases, there is a corresponding increase in the amount of fiscal government debt that a country holds; therefore, if governments are looking to reduce their debt, they should look to limit their corruption. Moreover, this paper provides meaningful insights and recommendations into why it is beneficial for governments with higher levels of debt to curtail corruption as a means to limit their financial risk and prevent widespread economic collapse.