The relationship between corruption and government size in selected Islamic countries: Bootstrap Panel Granger Causality Test

This study investigates the causal relations between corruption and government size in Islamic and developing countries of the D8 group from 2000 to 2013. For this purpose, some variables such as the control of corruption (as an indicator for measuring corruption) and the ratio of government consumption expenditure to GDP (as an indicator for assessing government size) are used. The method used in this study is based on the panel causality test provided by Konya (2006). This method is based on the Seemingly Unrelated Regressions (SUR) model and Wald tests with the country specific bootstrap critical values. Experimental results show the two-way causality between corruption and government size for Nigeria and Indonesia, one-way causality from the corruption to government size for Iran and Turkey, one-way causality from the government size to corruption for Malaysia and Bangladesh and lack of causality between the corruption and the government size for Egypt and Pakistan. Accordingly, we can say that the causality between corruption and government size is not the same in different countries of the D8 group, with regard to their particular circumstances.