Corruption and Financial Intermediation in a Panel of Regions: Cross-Border Effects of Corruption
AbstractThe importance of financial market reforms in combating corruption has been highlighted in the theoretical literature but has not been systemically tested empirically. In this study we provide a first pass at testing this relationship using both linear and nonmonotonic forms of the relationship between corruption and financial intermediation. Our study finds a negative and statistically significant impact of financial intermediation on corruption. Specifically, the results imply that a one standard deviation increase in financial intermediation is associated with a decrease in corruption of 0.20 points, or 16 percent of the standard deviation in the corruption index and this relationship is shown to be robust to a variety of specification changes, including: (i) different sets of control variables; (ii) different econometrics techniques; (iii) different sample sizes; (iv) alternative corruption indices; (v) removal of outliers; (vi) different sets of panels; and (vii) allowing for cross country interdependence, contagion effects, of corruption.
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Bibliographic InfoPaper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2011-67.
Date of creation: 2011
Date of revision:
corruption; contagion effects; financial Intermediation; panel data;
Other versions of this item:
- Muhammad Tariq Majeed & Ronald MacDonald, 2011. "Corruption and financial intermediation in a panel of regions: cross-border effects of corruption," Working Papers 2011_18, Business School - Economics, University of Glasgow.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
- H1 - Public Economics - - Structure and Scope of Government
- O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General
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