The Intriguing Nexus Between Corruption and Capital Account Restrictions
The paper develops a theoretical model showing a mutual relationship between corruption and capital account restrictions. According to the model, higher corruption induces stricter restrictions and vice versa. We test the model using panel data for 112 countries over the period 1984-2002 and find that corruption and restrictions are indeed mutually determined. Estimating the model simultaneously, capital account restrictions induce higher corruption. Higher corruption, in turn, is associated with more restrictions on the capital account. The empirical relationship is, however, not completely robust.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Beata K. Smarzynska & Shang-Jin Wei, 2000. "Corruption and Composition of Foreign Direct Investment: Firm-Level Evidence," NBER Working Papers 7969, National Bureau of Economic Research, Inc.
- Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July.
- Axel Dreher, 2002. "Does Globalization Affect Growth?," Development and Comp Systems 0210004, EconWPA, revised 04 Feb 2003.
- Keith Blackburn & Niloy Bose & M. Emranul Haque, 2010.
"Endogenous corruption in economic development,"
Journal of Economic Studies,
Emerald Group Publishing, vol. 37(1), pages 4-25, January.
- K Blackburn & N Bose & M E Haque, 2002. "Endogenous Corruption in Economic Development," Centre for Growth and Business Cycle Research Discussion Paper Series 22, Economics, The Univeristy of Manchester.
- K Blackburn & N Bose & M E Haque, 2003. "Endogenous Corruption in Economic Development," The School of Economics Discussion Paper Series 0302, Economics, The University of Manchester.
- Daniel Lederman & Norman V. Loayza & Rodrigo R. Soares, 2005.
"Accountability And Corruption: Political Institutions Matter,"
Economics and Politics,
Wiley Blackwell, vol. 17, pages 1-35, 03.
- Lederman, Daniel & Loayza, Norman & Reis Soares, Rodrigo, 2001. "Accountability and corruption : political institutions matter," Policy Research Working Paper Series 2708, The World Bank.
- Andvig, Jens Chr. & Moene, Karl Ove, 1990.
"How corruption may corrupt,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 13(1), pages 63-76, January.
- Vittorio Grilli & Gian Maria Milesi-Ferretti, 1995.
"Economic Effects and Structural Determinants of Capital Controls,"
IMF Staff Papers,
Palgrave Macmillan, vol. 42(3), pages 517-551, September.
- Vittorio Grilli & Gian M Milesi-Ferretti, 1995. "Economic Effects and Structural Determinants of Capital Controls," IMF Working Papers 95/31, International Monetary Fund.
- Axel Dreher & Christos Kotsogiannis & Steve McCorriston, 2007.
"Corruption Around the World: Evidence from a Structural Model,"
0702, Exeter University, Department of Economics.
- Dreher, Axel & Kotsogiannis, Christos & McCorriston, Steve, 2007. "Corruption around the world: Evidence from a structural model," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 443-466, September.
- Axel Dreher & Christos Kotsogiannis & Steve McCorriston, 2004. "Corruption Around The World: Evidence From A Structural Model," Public Economics 0406004, EconWPA.
- Alberto Alesina & Beatrice Weder, 1999.
"Do Corrupt Governments Receive Less Foreign Aid?,"
NBER Working Papers
7108, National Bureau of Economic Research, Inc.
- Stockman, Alan C & Hernandez D, Alejandro, 1988.
"Exchange Controls, Capital Controls, and International Financial Markets,"
American Economic Review,
American Economic Association, vol. 78(3), pages 362-74, June.
- Alan C. Stockman & Alejandro Hernandez D., 1985. "Exchange Controls, Capital Controls, and International Financial Markets," NBER Working Papers 1755, National Bureau of Economic Research, Inc.
- David Romer, 1997.
"Misconceptions and Political Outcomes,"
NBER Working Papers
6117, National Bureau of Economic Research, Inc.
- Drabek, Zdenek & Payne, Warren, 2001. "The impact of transparency on foreign direct investment," WTO Staff Working Papers ERAD-99-02, World Trade Organization (WTO), Economic Research and Statistics Division.
- Dooley, Michael P & Isard, Peter, 1980. "Capital Controls, Political Risk, and Deviations from Interest-Rate Parity," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 370-84, April.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, December.
- Shang-Jin Wei, 2000.
"Does Corruption Relieve Foreign Investors of the Burden of Taxes and Capital Controls?,"
in: International Taxation and Multinational Activity, pages 73-88
National Bureau of Economic Research, Inc.
- Shang-Jin Wei, 1999. "Does corruption relieve foreign investors of the burden of taxes and capital controls?," Policy Research Working Paper Series 2209, The World Bank.
- Gilles Saint Paul, 2000. "The 'new political economy': Two recent books," Economics Working Papers 462, Department of Economics and Business, Universitat Pompeu Fabra.
- Laura Alfaro, 2004. "Capital Controls: a Political Economy Approach," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 571-590, 09.
- Gersbach, Hans & Schniewind, Achim, 2005.
"Awareness of General Equilibrium Effects and Unemployment,"
CEPR Discussion Papers
5012, C.E.P.R. Discussion Papers.
- Gersbach, Hans & Schniewind, Achim, 2001. "Awareness of General Equilibrium Effects and Unemployment," IZA Discussion Papers 394, Institute for the Study of Labor (IZA).
- Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
- Glick, Reuven & Hutchison, Michael, 2005.
"Capital controls and exchange rate instability in developing economies,"
Journal of International Money and Finance,
Elsevier, vol. 24(3), pages 387-412, April.
- Reuven Glick & Michael Hutchison, 2002. "Capital controls and exchange rate instability in developing economies," Pacific Basin Working Paper Series 2000-05, Federal Reserve Bank of San Francisco.
- Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
- Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November.
- Bai, Chong-en & Wei, Shang-Jin, 2001. "The quality of bureaucracy and capital account policies," Policy Research Working Paper Series 2575, The World Bank.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
- Leonardo Bartolini & Allan Drazen, 1996.
"Capital account liberalization as a signal,"
11, Federal Reserve Bank of New York.
- Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
- Saha, Bibhas, 2001. "Red tape, incentive bribe and the provision of subsidy," Journal of Development Economics, Elsevier, vol. 65(1), pages 113-133, June.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Sargent, Thomas J., 1993. "Bounded Rationality in Macroeconomics: The Arne Ryde Memorial Lectures," OUP Catalogue, Oxford University Press, number 9780198288695, December.
- Smarzynska, Beata K. & Shang-Jin Wei, 2000. "Corruption and the composition of foreign direct investment - firm-level evidence," Policy Research Working Paper Series 2360, The World Bank.
- Axel Dreher & Thomas Herzfeld, 2005. "The Economic Costs of Corruption: A Survey and New Evidence," Public Economics 0506001, EconWPA.
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
- Sebastian Edwards, 1999.
"How Effective are Capital Controls?,"
NBER Working Papers
7413, National Bureau of Economic Research, Inc.
- Christopher J. Neely, 1999. "An introduction to capital controls," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 13-30.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Srinivasan, T. N., 1973. "Tax evasion: A model," Journal of Public Economics, Elsevier, vol. 2(4), pages 339-346.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpdc:0306004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.