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Monetary Policy and External Shocks in a Dollarized Economy with Credit Market Imperfections

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  • Koray Alper

Abstract

Using different combinations of culture, development and openness to international trade, we test the variability in the incidences of corruption at different stages of development or in other words the non-linearities in the relationship between corruption and development. We employ formal threshold model developed by Hansen (2000), and unlike the existing literature, we find that: (1) non-linear models that search for the break points in the relationship between corruption and development are statistically preferable than linear regressions; (2) the effect of development at any stage is much lower than that has been suggested by studies using linear regressions approach; (3) both culture and openness do not affect corruption directly; rather they have an effect on the location of break points in the relationship between corruption and development.

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Bibliographic Info

Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 93.

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Length: 46 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:man:cgbcrp:93

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  1. Philippe AGHION & Philippe BACCHETTA & Abhijit BANERJEE, 1999. "A Simple Model of Monetary Policy and Currency Crises," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9914, Université de Lausanne, Faculté des HEC, DEEP.
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  11. Paul Krugman, 1999. "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, Springer, vol. 6(4), pages 459-472, November.
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  16. Pierre-Richard Agénor & Peter J. Montiel, 2007. "Credit Market Imperfections and the Monetary Transmission Mechanism Part II: Flexible Exchange Rates," Centre for Growth and Business Cycle Research Discussion Paper Series 87, Economics, The Univeristy of Manchester.
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Cited by:
  1. Pierre-Richard Agénor & Peter J. Montiel, 2007. "Monetary Policy Analysis in a Small Open Credit-Based Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 90, Economics, The Univeristy of Manchester.

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