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Does corruption throw sand into or grease the wheels of financial sector development?

Author

Listed:
  • Arusha Cooray

    () (University of New South Wales
    CAMA
    CEPA)

  • Friedrich Schneider

    () (Johannes Kepler University of Linz)

Abstract

Abstract This paper examines the relationship between corruption and financial sector development in 106 countries. Using dummy variables to capture different levels of corruption, and interaction terms to see if financial sector development depends on institutional structures, we find evidence to support the ‘sand the wheels’ hypothesis. The results suggest that a decline in corruption is associated with higher levels of financial sector development.

Suggested Citation

  • Arusha Cooray & Friedrich Schneider, 2018. "Does corruption throw sand into or grease the wheels of financial sector development?," Public Choice, Springer, vol. 177(1), pages 111-133, October.
  • Handle: RePEc:kap:pubcho:v:177:y:2018:i:1:d:10.1007_s11127-018-0592-7
    DOI: 10.1007/s11127-018-0592-7
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    More about this item

    Keywords

    Corruption; Financial sector; Panel data;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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