This paper considers the effects of corruption and government spending on economic growth. It starts from an endogenous growth model and extends it to account for the detrimental effects of corruption on the potentially productive components of government spending, namely military and investment spending. The resulting model is estimated on a sample of African countries and the results show, first, that the growth rate is strongly influenced by the interaction between corruption and military burden, with the interaction between corruption and government investment expenditure having a weaker effect. Second, allowing for the cyclical economic fluctuations in specific countries leaves the estimated elasticities close to those of the full sample. Third, there are significant conditioning variables that need to be taken into account, namely the form of government, political instability and natural resource endowment. These illustrate the cross country heterogeneity when accounting for quantitative direct and indirect effects of key variables on economic growth. Overall, these findings suggest important policy implications.

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In this paper, we assess the impact of oil price ‡uctuations on the UK economy. We use an empirical strategy which allows us to decompose oil price changes from the underlying source of the shock. Our results show that, since the mid-1970s, oil price movements have been mainly associated with shocks to oil demand rather than oil supply. We also …nd that the consequences of oil price changes on UK macroeconomic aggregates depend on the di¤erent types of oil shocks. While increases in global real economic activity do not depress the UK economy in the short run, shortfalls in crude oil supply cause an immediate fall in GDP growth. In addition, since monetary policy depends on the nature of the shock hitting the oil market, domestic in ‡ation increases following a rise in the real oil price. Finally, our results also show that in response to oil price increases, the government de…cit decreases.

The predictions that economic freedom is beneficial in reducing corruption have not been found to be universally robust in empirical studies. The present work reviews this relationship by using firms' data in a cross-country survey and argues that approaches using aggregated macro data have not been able to explain it appropriately. We model cross-country variations of the microfounded economic freedom-corruption relationship using multilevel models. Additionally, we analyze this relationship by disentangling the determinants for several components of economic freedom because not all areas affect corruption equally. The results show that the extent of the macro-effects on the measures of (micro)economic freedom for corruption, identified by the degree of economic development of a country, can explain why a lack of competition policies and government regulations may yield more corruption. Estimations for Africa and transition economy subsamples confirm our conjectures.JEL : H10; H11; H50; K20; O5