This paper examines the effects of economic freedom, democracy and its interaction term on controlling corruption. The results indicate that interaction between economic freedom and democracy has a significant impact on combating corruption. Partial effect analysis shows that economic freedom reduces corruption in any political environment, and the effect is substantially greater with a higher-level of democracy. In contrast democracy increases corruption when the level of economic liberalization is low, however, once past the threshold level corruption is substantially lower with full economic freedom.

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Foreign aid to the island economies is a major source for foreign exchange and resource needs. This paper presents an empirical analysis of the relationship between foreign aid and economic growth in the case of Fiji. A neoclassical production function is applied to estimate the aid-growth nexus. Since the data employed are time series for the period 1968 to 1996, the Autoregressive Distributed Lag approach to cointegration is utilized to estimate the models. Components of total aid, such as grant aid, loan aid, technical cooperation, bilateral and multilateral aid flows are also utilized to estimate a disaggregated short-run and long-run relationship between foreign aid and economic growth. The results show that total aid flows and its various forms, i.e. bilateral aid, grant aid and technical cooperation grant aid, has a significant impact on economic growth in Fiji. As for domestic resources, only exports and private investments in two equations show positive contribution to growth.

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