Corruption and Growth Under Weak Identification

The goal of this paper is to revisit the influential work of Mauro [1995] focusing on the strength of his results under weak identification. He finds a negative impact of corruption on investment and economic growth that appears to be robust to endogeneity when using two-stage least squares (2SLS). Since the inception of Mauro [1995], much literature has focused on 2SLS methods revealing the dangers of estimation and thus inference under weak identification. We reproduce the original results of Mauro [1995] with a high level of confidence and show that the instrument used in the original work is in fact 'weak' as defined by Staiger and Stock [1997]. Thus we update the analysis using a test statistic robust to weak instruments. Our results suggest that under Mauro's original model there is a high probability that the parameters of interest are locally almost unidentified in multivariate specifications. To address this problem, we also investigate other instruments commonly used in the corruption literature and obtain similar results.

An Assessment of the Case for Monetary Union or Official Dollarization in Argentina, Brazil, Chile, Uruguay and Venezuela

We use a data set covering the whole period of Argentina's currency board and most of that spanned by the Mercosur trade agreement to examine the case for either a Latin American monetary union or monetary union with the USA (through official dollarization). Our econometric evidence using VAR techniques indicates that macroeconomic shocks are still so highly asymmetric in Latin America and between Latin American countries and the USA as to make monetary union or official dollarization somewhat doubtful policies.