The CPI index, or Corruption Perceptions Index, provides an assessment of the perceived level of corruption in the public sector of a country. It ranks countries based on the extent to which corruption is perceived among public officials and politicians. The index is a composite measure compiled by more than ten independent institutions, using surveys and research conducted among business people, country analysts, and experts from various sources.
The CPI index ranges from 0 to 100, with higher scores indicating lower perceived corruption and better rankings. Prior to 2012, the maximum score was 10.
People may be excluded or subject to scrutiny based on the CPI index to address international efforts against corruption and money laundering. By classifying individuals in relation to countries with high CPI index scores, measures can be taken to prevent international transactions involving funds that may be suspected of being involved in money laundering activities.
Prof. Dr. Friedrich Thießen, Chair of Finance and Banking at the Chemnitz University of Technology, conducted an analysis linking the international CPI index with the frequency of sovereign debt rescheduling recorded by the Paris Club. The analysis revealed a statistically significant correlation: countries with higher levels of corruption have a greater probability of not paying their debts and resorting to debt restructuring at the expense of creditors. The coefficient of determination, which measures the strength of the relationship, is 85%, indicating a high level of predictability in assessing the risk of debt restructuring. This information can be valuable for financial markets in quantifying risk.
Overall, the corruption index provides insights into how corruption is perceived by business people in a particular country. It serves as an important tool for understanding the business environment and assessing associated risks.