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Corruption, soundness of the banking sector, and economic growth: A cross-country study

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  • Park, Junghee
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    Abstract

    This paper explores the impact of corruption on both the banking sector and economic growth; we determine the impact using 76 macroeconomic data from various countries over the period 2002–2004. The results of various cross-sectional regressions provide substantial evidence that corruption significantly aggravates the problems with bad loans in the banking sector. In this study, we also find some evidence of a new channel through which corruption lowers economic growth: Corruption distorts the allocation of bank funds from normal projects to bad projects, which decreases the quality of private investments, hence it decreases economic growth.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0261560611001124
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 31 (2012)
    Issue (Month): 5 ()
    Pages: 907-929

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    Handle: RePEc:eee:jimfin:v:31:y:2012:i:5:p:907-929

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Non-performing loans; Corruption perception index; Financial crisis; Economic Growth;

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    References

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    Cited by:
    1. ATI Abdessatar & BEN JAZIA Rachida, 2013. "Institutional Quality And Financial Stress: Experience From Emerging Country," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 8(3), pages 5-20, December.

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