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Financial Deepening, Economic Growth and Corruption: The Case of Islamic Banking

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  • Piyadasa Edirisuriya

    (Department of Banking and Finance, Monash University, Caulfield Campus, 900 Dandenong Road, Caulfield East VIC 3145, AUSTRALIA)

Abstract

As Islamic banking is becoming popular among bank customers, attempts are made in this study to examine the relationship between the corruption level and financial market deregulation, which causes financial deepening, using data for Islamic banks in 14 countries. This study employs a panel data analysis and uses three variables to represent the corruption level: the World Bank¡¯s control of corruption index (Cor), Transparency International¡¯s corruption perception index (Cor-per) and Heritage Foundation¡¯s corruption perception data (Cor-hf). Using fixed effect regression, the results of this study support the viewpoint that there is no significant positive relationship between the corruption level and financial deepening in countries where Islamic banking is dominant. This finding could help policy makers and regulators to implement further deregulatory measures in these countries.

Suggested Citation

  • Piyadasa Edirisuriya, 2017. "Financial Deepening, Economic Growth and Corruption: The Case of Islamic Banking," Review of Economics & Finance, Better Advances Press, Canada, vol. 8, pages 1-16, May.
    • Handle: RePEc:bap:journl:170201
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    More about this item

    Keywords

    Islamic banking; Deregulation; Financial deepening; Corruption; panel data analysis; Economic growth;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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