Understanding the link between aid and corruption: A causality analysis

This paper addresses the direction of the causal link between aid and corruption. We perform Granger causality tests in a dynamic GMM panel framework to evaluate the sign and direction of causality between aid and corruption on a dataset of 71 developing countries over the period 1996-2009. We find no significant causal relation between aid and corruption running in either direction. Our results are robust to various controls.