Country’s brand and corruption level: cointegration analysis

Abstract

The paper summarized the arguments and counterarguments in the scientific debate on the impact of corruption on a country's brand. The modern approaches to the analysis of corruption’s impact on the country's macroeconomic indicators were analysed. The authors justified that increasing the corruption’s level is considered as one of the most significant deterrents to the radical political and economic changes taking place in the countries by society. The main purpose of the paper is to analyse the long-term cause-and-effect relationships between Control of Corruption and the country's brand. Four European countries (Latvia, Lithuania, Poland and Ukraine) were selected as the object of the investigation, which pursued an evolutionary policy of reforming the political and economic system after the collapse of the Soviet Union, which encouraged the practice of eliminating corruption. The research period was 2000-2018. With a purpose to check the hypothesis of the investigation the 3-stage algorithm to estimate the long-term cause-and-effect relationships between Control of Corruption and the key parameters of the country brand is developed. The developed algorithm was based on the Augmented Dicker-Fuller test and granger casualty test. It is established that for Ukraine, the interconnections between Control of Corruption and International migrant stock, Control of Corruption and Exports of goods and services, Control of Corruption and Foreign direct investment had a unidirectional character of influence of the corruption’s level on the components of the country’s brand. The findings proved that 51.73%, 43.79% and 66% of the total fluctuations of International migrant stock, Exports of goods and services, Foreign direct investment depend on changes in the level of corruption in the country. The obtained results allowed concluding that for the European Union countries (Poland, Lithuania and Latvia) it was the country brand that had a positive impact on reducing the corruption’s level. It was justified that the choice of a specific model for combating the corruption’s level in the chosen countries significantly determined the course of their political transformation and influenced the change’s rate of the social and economic development.