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Corruption, soundness of the banking sector, and economic growth: A cross-country study

  • Park, Junghee
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    This paper explores the impact of corruption on both the banking sector and economic growth; we determine the impact using 76 macroeconomic data from various countries over the period 2002–2004. The results of various cross-sectional regressions provide substantial evidence that corruption significantly aggravates the problems with bad loans in the banking sector. In this study, we also find some evidence of a new channel through which corruption lowers economic growth: Corruption distorts the allocation of bank funds from normal projects to bad projects, which decreases the quality of private investments, hence it decreases economic growth.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0261560611001124
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    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 31 (2012)
    Issue (Month): 5 ()
    Pages: 907-929

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    Handle: RePEc:eee:jimfin:v:31:y:2012:i:5:p:907-929
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30443

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