Say I have an augmented growth regression, where my Y is GDP growth, and my Xs are the classical MRW variables, + international aid + corruption + the interaction term between the two.
Basically, I'm interested in seeing if lower corruption increases the effectiveness of international aid, which means I'd like to see a positive sign on my interaction term.
However, I also think I should see a negative sign on corruption, as the higher corruption, the lower should growth be.
Now, my questions:
- Is this possible as I describe it? Can I see a negative component but a positive interaction term? In which case, how should I interpret it?
- Or is there a reason the coefficient on corruption should be positive, and still indicate that higher "institutional quality" has a positive impact on growth by itself and also in interaction with aid?