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Does Corruption Increase Financial Development? A Time Series Analysis in Pakistan

Author

Listed:
  • Muhammad Shahbaz

    () (COMSATS Institute of Information Technology, Lahore Campus, Pakistan)

  • Qazi Muhammad Adnan Hye

    (Economics Department, Faculty of Economics and Administration, University of Malaya, Malaysia)

  • Muhammad Shahbaz Shabbir

    (University of Illinois at Urbana Champaign, Champaign, USA)

Abstract

The intention of paper is to analyze the effect of corruption on financial development in Pakistan using time series data for the period of 1987-2009. In doing so, ARDL bounds testing approach to cointegration has been applied. The direction of causality is investigated by using VECM granger causality approach. Our results reveal that rise in corruption promotes financial development and bivariate causal relationship is found between both variables. Thisstudy opens new directions for policy makers to save financial sector by declining corruption. This will not only facilitate financial institutions to perk up the effectiveness of financial sector but also stimulates and triggers economic growth rate.

Suggested Citation

  • Muhammad Shahbaz & Qazi Muhammad Adnan Hye & Muhammad Shahbaz Shabbir, 2013. "Does Corruption Increase Financial Development? A Time Series Analysis in Pakistan," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 1(10), pages 113-124, October.
  • Handle: RePEc:ijr:journl:v:1:y:2013:i:10:p:113-124
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    References listed on IDEAS

    as
    1. Muhammad Shahbaz & Khalil Ahmad & A. R. Chaudhary, 2008. "Economic Growth and Its Determinants in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 471-486.
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    3. Mohammad Shahbaz, 2009. "A Reassessment of Finance-Growth Nexus for Pakistan: Under the Investigation of FMOLS and DOLS Techniques," The IUP Journal of Applied Economics, IUP Publications, vol. 0(1), pages 65-80, January.
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    Cited by:

    1. Shahbaz, Muhammad, 2010. "Does financial instability increase environmental pollution in Pakistan?," MPRA Paper 31360, University Library of Munich, Germany, revised 28 Mar 2011.

    More about this item

    Keywords

    Financial development; corruption; Pakistan;

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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