Muhammad, Shahbaz and Qazi, Muhammad Adnan Hye and Muhammad, Shahbaz Shabbir (2011): Does Corruption Increase Financial Development? A Time Series Analysis in Pakistan.
Download (82kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Does Corruption Increase Financial Development? A Time Series Analysis in Pakistan|
|English Title:||Does Corruption Increase Financial Development? A Time Series Analysis in Pakistan|
|Keywords:||Financial Development, Corruption, Cointegration|
|Subjects:||B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics|
|Depositing User:||Muhammad Shahbaz|
|Date Deposited:||19. Mar 2011 16:25|
|Last Modified:||12. Feb 2013 02:01|
Abeysinghe, T. and Tan, K. B., (1999). Small sample estimation of a cointegrating vector: An empirical evaluation of six estimation techniques. Applied Economics Letters, 6 (10), pp: 645-648.
Aburime, T. U., (2009). Impact of corruption on bank profitability in Nigeria. Proceedings of FIKUSZ ’09 Symposium for Young Researchers, 2009, pp: 7-16.
Ahmad, N and S, Ali., (2010). Corruption and financial sector performance: A cross-country analysis. Economics Bulletin, 30(1), pp: 303-308.
Asiedu, E and J, Freeman., (2009). The effect of corruption on investment growth: evidence from firms in Latin America, Sub-Saharan Africa, and Transition countries. Review of Development Economics, 13(2), pp: 200-214.
Bahmani-Oskooee, M and G. G, Goswami., (2005). The impact of corruption on the black market premium. Southern Economic Journal, 71(3), pp: 483-493.
Bowers, W. and Pierce, G., (1975). The illusion of deterrence in Isaac Ehrlich’s work on the deterrent effect of capital punishment. Yale Law Journal, 85 (2), pp: 187-208.
Braun, M and R, Tella., (2000). Inflation and corruption. Harvard Business Scholl, Harvard University.
Ehrlich, I and Lui, F. T., (1999). Bureaucratic corruption and endogenous economic growth. Journal of Political Economy, 107(6), pp: 270-293.
Ehrlich, I., (1975). The deterrent effect of capital punishment–A question of life and death. American Economic Review, 65 (3), pp: 397-417.
Ehrlich, I., (1977). The deterrent effect of capital punishment reply. American Economic Review, 67 (3), pp: 452-458.
Engle, R. F and Granger, C. W. J., (1987). Cointegration and error correction representation: estimation and testing. Econometrica, 55(2), pp: 251-276.
Gupta, S., Davoodi, H and R, Alonso-Terme., (1998). Does corruption affect income inequality and poverty? International Monetary Fund, Working Paper No. 76.
Haug, A., (2002). Temporal aggregation and the power of cointegration tests: a monte carlo study. Oxford Bulletin of Economics and Statistics, 64(4), pp: 399-412.
Johansen, S and Juselius, K., (1990). Maximum likelihood estimation and inference on cointegration with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), pp: 169-210.
Johansen, S., (1991). Estimation and hypothesis testing of cointegrating vectors in gaussian vector autoregressive models. Econometrica, 59(6), pp: 1551-1580.
Johansen, S., (1992). Cointegration in partial systems and the efficiency of single equation analysis. Journal of Econometrics, 52(3), pp: 389-402.
Kahane, L.H. (2001) Regression Basics. New Delhi: Sage Publications India Pvt. Ltd.
Khan, M. A., Qayyum, A and Skiekh, S. A., (2005). Financial development and economic growth: The case of Pakistan” Paper Presented at 21ST Annual Meeting & Conference, PIDE. Quid-I-Azam University Campus, Islamabad.
Koutsoyiannis, A. (2003) Theory of Econometrics (Second Edition). New York: Palgrave.
Laurenceson, J and J, C. H. Chai., (2003). Financial reform and economic development in China. Cheltenham, UK, Edward Elgar.
Layson, S., (1983). Homicide and deterrence: another view of the Canadian time series evidence. Canadian Journal of Economics, 16 (1), pp: 52-73.
Luetkepohl, H., (2005). Structural Vector Autoregressive Analysis for Cointegrated Variables. Economics Working Papers ECO2005/02, European University Institute.
Mo, P. H., (2001). Corruption and economic growth. Journal of Comparative Economics, 29 (1), pp: 66-79.
Narayan, P. K., (2005). The saving and investment nexus for China: evidence from cointegration tests. Applied Economics, 37(17), pp: 1979-1990.
Ouattara, B., (2004). Foreign Aid and Fiscal Policy in Senegal. University of Manchester, Manchester, UK.
Pesaran, M. H and Pesaran, B., (1997). Working with Microfit 4.0: Interactive Econometric Analysis”, Oxford: Oxford University Press.
Pesaran, M. H and Shin, Y., (1999). An autoregressive distributed lag modeling approach to cointegration analysis. Chapter 11 in Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Strom S (ed.). Cambridge University Press: Cambridge.
Pesaran, M. H., Shin, Y and Smith, R. J., (2000). Structural analysis of vector error correction models with exogenous I(1) variables. Journal of Econometrics, 97 (2), pp: 293-343.
Pesaran, M. H., Shin, Y and Smith, R. J., (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(20), pp: 289-326.
Phillips, P. C. B and B. E, Hansen., (1990). Statistical inference in instrumental variables regression with I(1) processes. Review of Economic Studies, 57(1), pp: 99-125.
Seddighi. H. R, A. Lawler and A. V. Katos, (2006). Applied Econometrics: A Practical Approach. Routledge, London and New York.
Shahbaz, M., (2009). A reassessment of finance-growth nexus for Pakistan: under the investigation of FMOLS and DOLS techniques. ICFAI Journal of Applied Economics, 8(1), pp: 65-80.
Shahbaz. M, (2010). Income inequality-economic growth and non-linearity: a case of Pakistan. International Journal of Social Economics, 37 (8), pp: 613-636.
Shahbaz. M, Ahmad, K and Chaudhary. A. R., (2008). Economic growth and its determinants in Pakistan. The Pakistan Development Review, 47, pp: 471-486.
Shahbaz. M., Shamim, A and Naveed, A., (2010). Macroeconomic environment and financial sector's performance: econometeric evidence from three traditional approaches. The IUP Journal of Financial Economics, 1(2-3), pp: 103-123.
Tanzi, V and H, Dawoodi., (1997). Corruption, public investment, and growth. International Monetary Fund, Working Paper No. 139.
Turner, P., (2006). Response surfaces for an F-test for cointegration, Applied Economics Letters, 13(8), 479-482.