The Measurement and Macro-Relevance of Corruption: A Big Data Approach
IMF Working Papers, August 31, 2018
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Bibliographic details
- Authors: Sandile Hlatshwayo, Anne Oeking, Manuk Ghazanchyan, David Corvino, Ananya Shukla, Lamin Y Leigh
- Published: August 31, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484373095.001
Objective and contribution
- Address limitations of existing corruption indicators: lack of time variation, reliance on a limited pool of experts, and inability to distinguish corruption from institutional capacity gaps.
- Construct the first big data, cross-country news flow indices of corruption (NIC) and anti-corruption (anti-NIC).
- Leverage news media coverage by running country-specific search algorithms over more than 665 million international news articles.
- Provide indices that correlate with existing measures of corruption while offering additional richness in time-series variation.
Methodology
- Build NIC and anti-NIC indices using country-specific search algorithms applied to a corpus of more than 665 million international news articles.
- Draw on theory from corporate finance and behavioral economics to assess how news about corruption and anti-corruption efforts affects economic agents’ assessments and subsequent economic outcomes.
- Use event-study style analysis to link NIC and anti-NIC news shocks to financial and real economic variables.
Key findings and quantitative results
- NIC shocks negatively impact financial variables (e.g., stock market returns and yield spreads) and real variables (e.g., growth), with some country heterogeneity.
- On average, NIC shocks lower real per capita GDP growth by 3 percentage points over a two-year period, illustrating persistence in the effect of such shocks.
- Anti-NIC efforts show suggestive evidence of a sustained positive macro impact only when paired with meaningful institutional strengthening, proxied by capacity development efforts.
- NIC and anti-NIC indices correlate well with existing measures of corruption while providing additional time-series variation.
Policy implications and recommendations
- Monitoring corruption through high-frequency, large-scale news-based indices (NIC and anti-NIC) can complement existing perception-based measures and capture temporal dynamics of corruption-related events.
- Anti-corruption initiatives may yield sustained positive macroeconomic effects primarily when combined with institutional capacity development; isolated anti-corruption publicity or enforcement without capacity strengthening may be insufficient.
- Policymakers and international agencies should consider pairing anti-corruption efforts with targeted capacity development to realize durable macroeconomic benefits.
Source: IMF Working Paper "The Measurement and Macro-Relevance of Corruption: A Big Data Approach", Sandile Hlatshwayo, Anne Oeking, Manuk Ghazanchyan, David Corvino, Ananya Shukla, Lamin Y Leigh, August 31, 2018.
Content in this bundle
- The Measurement and Macro-Relevance of Corruption: A Big Data Approach, WP/18/195, August 2018