MACROECONOMIC FORCES AND THE SHADOW OF CORRUPTION: EVIDENCE FROM PAKISTAN’S PUBLIC SECTORS ORGANIZATIONS

Abstract

The core objective of this study is to empirically examine the impact of key macroeconomic indicators—Inflation, Gross Domestic Product (GDP), Government Expenditure, External Debt, Foreign Direct Investment (FDI), and Gross National Expenditure (GNE)—on corruption in public sector organizations in Pakistan, as measured by the Corruption Perception Index (CPI). The analysis is based on secondary data collected from the Pakistan Bureau of Statistics for the period 2010–2015. To assess the robustness of the model, the Durbin–Watson test was applied to detect the presence of serial correlation, and the results confirmed no evidence of autocorrelation. The model further demonstrated strong predictive validity. Empirical findings indicate that inflation, GDP, government expenditure, and FDI exert a statistically significant and positive influence on corruption perception, suggesting that increases in these variables heighten perceived corruption levels. Conversely, external debt and GNE were found to have a significant but negative relationship with corruption perception, implying that higher levels of these indicators are associated with reduced corruption perceptions in the Pakistani context. These results underscore the complex interplay between macroeconomic dynamics and corruption, offering critical insights for policymakers seeking to strengthen governance and enhance transparency in public sector organizations.