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

  • Muhammad, Shahbaz
  • Qazi, Muhammad Adnan Hye
  • Muhammad, Shahbaz Shabbir

The aim of present paper is to investigate the effect of corruption on financial development in Pakistan by using ARDL bounds testing approach to cointegration. The direction of causal relationship between the variables is examined by using VECM granger causality approach. Our empirical findings indicate that corruption promotes financial development. Causality analysis reveals that corruption and financial development are complementary.

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File URL: http://mpra.ub.uni-muenchen.de/29640/1/MPRA_paper_29640.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29640.

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Date of creation: 02 Mar 2011
Date of revision: 10 Mar 2011
Handle: RePEc:pra:mprapa:29640
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  1. Naved Ahmad & Shahid Ali, 2010. "Corruption and financial sector performance: A cross-country analysis," Economics Bulletin, AccessEcon, vol. 30(1), pages 303-308.
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  4. 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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  8. 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.
  9. Mohsen Bahmani-Oskooee & Gour G. Goswami, 2005. "The Impact of Corruption on the Black Market Premium," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 483-493, January.
  10. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  11. Bazoumana Ouattara, 2006. "Aid, debt and fiscal policies in Senegal," Journal of International Development, John Wiley & Sons, Ltd., vol. 18(8), pages 1105-1122.
  12. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
  13. Haug, Alfred A, 2002. " Temporal Aggregation and the Power of Cointegration Tests: A Monte Carlo Study," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(4), pages 399-412, September.
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  15. Sanjeev Gupta, 1998. "Does Corruption Affect Income Inequality and Poverty?," IMF Working Papers 98/76, International Monetary Fund.
  16. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  17. Muhammad Shahbaz, 2010. "Income inequality-economic growth and non-linearity: a case of Pakistan," International Journal of Social Economics, Emerald Group Publishing, vol. 37(8), pages 613-636, July.
  18. Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
  19. Isaac Ehrlich & Francis T. Lui, 1999. "Bureaucratic Corruption and Endogenous Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S270-S293, December.
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  22. Khan, Arshad & Qayyum, Abdul & Sheikh, Saeed, 2005. "Financial Development and Economic Growth: The Case of Pakistan," MPRA Paper 2145, University Library of Munich, Germany, revised 2005.
  23. Toni Uhomoibhi ABURIME, 2009. "Impact of corruption on bank profitability in Nigeria," Proceedings of FIKUSZ '09, in: László Áron Kóczy (ed.), Proceedings of FIKUSZ '09, pages 7-16 Óbuda University, Keleti Faculty of Business and Management.
  24. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
  25. Stephen K. Layson, 1983. "Homicide and Deterrence: Another View of the Canadian Time-Series Evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 52-73, February.
  26. Muhammad Shahbaz & S M Aamir Shamim & Naveed Aamir, 2010. "Macroeconomic Environment and Financial Sector’s Performance: Econometric Evidence from Three Traditional Approaches," The IUP Journal of Financial Economics, IUP Publications, vol. 0(1 & 2), pages 103-123, March & J.
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