The Intriguing Nexus between Corruption and Capital Account Restrictions
AbstractThe paper develops a theoretical model showing a mutual relationship between corruption and capital account restrictions. According to the model, higher corruption induces stricter restrictions and vice versa. We test the model using panel data for 112 countries over the period 1984-2002 and find that corruption and restrictions are indeed mutually determined. Estimating the model simultaneously, capital account restrictions induce higher corruption. Higher corruption, in turn, is associated with more restrictions on the capital account. The empirical relationship is, however, not completely robust.
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Bibliographic InfoPaper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 05-113.
Length: 40 pages
Date of creation: Nov 2005
Date of revision:
corruption; capital account restrictions; dynamic panel;
Other versions of this item:
- Lars Siemers & Axel Dreher, 2005. "The Intriguing Nexus between Corruption and Capital Account Restrictions," RWI Discussion Papers 0035, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
- Axel Dreher & Lars-H.R. Siemers, 2003. "The Intriguing Nexus Between Corruption and Capital Account Restrictions," Development and Comp Systems 0306004, EconWPA, revised 07 Apr 2004.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
- D19 - Microeconomics - - Household Behavior - - - Other
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-PBE-2006-01-24 (Public Economics)
- NEP-REG-2006-01-24 (Regulation)
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