The purpose of this paper is to show that states where corruption is greater also have higher levels of inflation.
Using a sample of all US states through the period 1992-2007 and various factors common across states that could impact the level of corruption or inflation, multiple regression techniques are used to determine corruption impact to inflation.
The study finds that corruption contributes, along with aid transfer, positively to inflation in the US states. The results are robust even after scaling the corruption variable to different determinants.
While there is some evidence on the relationship between corruption and inflation in cross-country dataset, there is no such evidence on it within country dataset. This paper, however, provides evidence on the relationship between corruption and inflation using state-level data of the US states.
