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Corruption, inflation and growth


  • Blackburn, Keith
  • Powell, Jonathan


We present a model in which the embezzlement of tax revenues by public officials leads the government to rely more on seigniorage to finance its expenditures. This raises inflation which depresses investment and growth via a cash-in-advance constraint.

Suggested Citation

  • Blackburn, Keith & Powell, Jonathan, 2011. "Corruption, inflation and growth," Economics Letters, Elsevier, vol. 113(3), pages 225-227.
  • Handle: RePEc:eee:ecolet:v:113:y:2011:i:3:p:225-227 DOI: 10.1016/j.econlet.2011.06.015

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    References listed on IDEAS

    1. Imam Patrick Amir & Jacobs Davina, 2014. "Effect of Corruption on Tax Revenues in the Middle East," Review of Middle East Economics and Finance, De Gruyter, vol. 10(1), pages 1-24, April.
    2. De Gregorio, Jose, 1993. "Inflation, taxation, and long-run growth," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 271-298, June.
    3. Kwabena Gyimah-Brempong, 2002. "Corruption, economic growth, and income inequality in Africa," Economics of Governance, Springer, vol. 3(3), pages 183-209, November.
    4. Roubini, Nouriel & Sala-i-Martin, Xavier, 1995. "A growth model of inflation, tax evasion, and financial repression," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 275-301, April.
    5. Al-Marhubi, Fahim A., 2000. "Corruption and inflation," Economics Letters, Elsevier, vol. 66(2), pages 199-202, February.
    6. Hongyi Li & Lixin Colin Xu & Heng-fu Zou, 2000. "Corruption, Income Distribution, and Growth," Economics and Politics, Wiley Blackwell, vol. 12(2), pages 155-182, July.
    7. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2007. "Distribution and development in a model of misgovernance," European Economic Review, Elsevier, vol. 51(6), pages 1534-1563, August.
    8. Niloy Bose & Jill A. Holman & Kyriakos C. Neanidis, 2007. "The Optimal Public Expenditure Financing Policy: Does The Level Of Economic Development Matter?," Economic Inquiry, Western Economic Association International, vol. 45(3), pages 433-452, July.
    9. Adam, Christopher S. & Bevan, David L., 2005. "Fiscal deficits and growth in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 571-597, April.
    10. Blackburn, Keith & Bose, Niloy & Emranul Haque, M., 2006. "The incidence and persistence of corruption in economic development," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2447-2467, December.
    11. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
    12. Keefer, Philip & Knack, Stephen, 1997. "Why Don't Poor Countries Catch Up? A Cross-National Test of Institutional Explanation," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 590-602, July.
    13. Gupta, Rangan, 2008. "Tax evasion and financial repression," Journal of Economics and Business, Elsevier, vol. 60(6), pages 517-535.
    14. Dhaneshwar Ghura, 1998. "Tax Revenue in Sub-Saharan Africa; Effects of Economic Policies and Corruption," IMF Working Papers 98/135, International Monetary Fund.
    15. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    16. Javier Andrés & Ignacio Hernando, 1999. "Does Inflation Harm Economic Growth? Evidence from the OECD," NBER Chapters,in: The Costs and Benefits of Price Stability, pages 315-348 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Mazhar, Ummad & Méon, Pierre-Guillaume, 2017. "Taxing the unobservable: The impact of the shadow economy on inflation and taxation," World Development, Elsevier, vol. 90(C), pages 89-103.
    2. Meixing Dai & Moïse Sidiropoulos & Eleftherios Spyromitros, 2015. "Fiscal Policy, Institutional Quality and Central Bank Transparency," Manchester School, University of Manchester, vol. 83(5), pages 523-545, September.
    3. Mustafa ÜNVER & Julide Yalçýnkaya KOYUNCU, 2016. "The Impact of Poverty on Corruption," Journal of Economics Library, KSP Journals, vol. 3(4), pages 632-642, December.
    4. Keith Blackburn & Gareth Downing, 2015. "Deconcentration, Corruption and Economic Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 209, Economics, The Univeristy of Manchester.
    5. Humna Ahsan & Keith Blackburn, 2015. "Human capital and income distribution in a model of corruption," Centre for Growth and Business Cycle Research Discussion Paper Series 208, Economics, The Univeristy of Manchester.

    More about this item


    Corruption; Inflation; Seigniorage; Growth;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models


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