Buscemi, Antonino and Yallwe, Alem Hagos (2011): Money laundry and financial development. Published in: Antiriciclaggio & 231 del 2001 , Vol. nr. 0, No. ISSN 2239-0308 (July 2011): pp. 233-264.
This is the latest version of this item.
Download (518kB) | Preview
Abstract This study is the novel in analyzing the relationship between money laundry and financial development and also the contribution of financial development in promoting for the occurrence of illegal transactions originated from domestic or foreignmarket. Moreover, the study tried to create link between the theoretical issues of financial development and money laundry with the empirical result using a two period model. The estimation made using the General Moment Method(GMM) for the panel data from 1985 to 2008.We included six countries in our sample: Italy, Switzerland, India, China,Ethiopia and Kenya.We have used the Phillips-Perron(PP) method of testing unit root because of its advantage over the Augmented Dickey Fuller (ADF). To test the number of cointegrating relationships among variables or to determine whether any combinations of the variables are cointegrated,the study employed the Johansen cointegration testing approach. The basic approach uses tax variable in order to determine the illegal currency in circulation. However, in this study we used the level of financial development as a principal factor for increasing or decreasing currency in circulation. Our assumption is, the level of financial development trigger for the demand of money(circulation of money) and consequently promote the occurrence of money laundry. Our regression result exhibited the level of financial development have a significant contribution for increasing demand for money that could be used for legal and illegal transactions. In countries where well(less) financial development exist, the more(less) exposed environmentfor the occurrence of illegal transactions(i.e. money laundry).
|Item Type:||MPRA Paper|
|Original Title:||Money laundry and financial development|
|English Title:||Money laundry and financial development|
|Keywords:||money laundry and financial development|
|Subjects:||F - International Economics > F3 - International Finance
G - Financial Economics > G3 - Corporate Finance and Governance
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles
|Depositing User:||antonino buscemi|
|Date Deposited:||31. Aug 2011 15:41|
|Last Modified:||01. Jan 2016 13:39|
Agarwal, J.D., (1991), “Black Money: Some dimensions”, Finance India, Vol V No 1.
Abalkin, A. and J. Whalley (1999), The Problem of Capital Flight from Russia. World Economy. Vol. 22, p. 423.
Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial origins of comparative development: an empirical investigation. American Economic Review, 91(5), 1369–1401.
Agarwal, J. D. and AmanAgarwal (2004), Globalization and international capital flows, Finance India, Vol. 19/1, pp. 65-99.
Agarwal, J. D. and AmanAgarwal (2006), Money Laudering: New Forms of Crime, Victimization, presented at the National Workshop on New Forms of Crime, Victimization, with reference to Money Laundering, Indian Society of Victimology, Department of Criminology, University of Madras, India.
Arrow, K.J., and G. Debreu. 1954. “Existence of an Equilibrium for a Competitive Economy.Econometrica, vol. 22, no. 3 (July):265–290.
Australasian Centre for Policing Research (ACPR) 2006, Standardisation of definitions of identity crime terms: A step towards consistency, Commonwealth of Australia (145.3), March, pp. 1-22.
Bagella, M., Becchetti, L., Lo Cicero, M., (2004). ‘Regional externalities and direct effect on legislation against money laundering: A test on Excess money balances in the five Andean Countries’. Journal of Money Laundering Control, Vol. 7, pp. 347-366.
Bailliu, J., (2000), ”Private Capital Flows, Financial Development and Economic Growth in Developing Countries,”Working Paper 2000-15, Bank of Canada.
Bartlett, L.B., (2002). TheNegative Effects ofMoney Laundering on Economic Development, The Asian Development Bank, Regional, Assistance Project No. 5967. Countering Money Laundering in the Asian and Pacific Region.
Beck, T., A. Demirgüç-Kunt and R. Levine (2003), “Law, endowmentandfinance”, Journal of Financial Economics, 70: 137-181.
Bekaert, Geert, Campbell R. Harvey and Robin Lumsdaine, (2002a), Dating the Integration of WorldCapital Markets. Journal of Financial Economics65, 203–247.
Bekaert, Geert, Campbell R. Harvey and Robin Lumsdaine, (2002b), The Dynamics of Emerging Market Equity Flows. Journal of International Money and Finance21, 3, 295–350.
Boyd, J. H. and R. Levine and B. D. Smith (2001), “The impact of inflationon financial sector performance”, Journal of Monetary Economics, 47: 221-48.
Cagan, Phillip (1958), The demand for currency relative to the total moneysupply. Journal of Political Economy 66 (August): 303-28.
Chinn, Menzie D. and Hiro Ito (2005), “Current Account Balances, Financial Development, andInstitutions: Assaying the World ‘Savings Glut’,” La Follette School Working Paper No. 2005-023. October.
Claessens, S., A. Demirgüç-Kunt and H. Huizinga (1998), “How doesforeign entry and the domestic banking market?” World Bank PolicyResearch working paper no. 1918.
Demirgüç-Kunt, A. and E. Detragiache(1998), “Financial liberalization and financial fragility”, World Bank Policy Research working paper no.1917.
Diamond, J.,(1997), Guns, Germs, and Steel: The Fates of HumanSocieties, W.W. Norton, New York, NY.
Diamond, J.,(1997), Guns, Germs, and Steel: The Fates of HumanSocieties, W.W. Norton, New York, NY.
Do, Q.-T. and A. A. Levchenko (2004), “Trade and financial development”,World Bank Policy Research working paper no.3347.
Easterly, W., Levine, R., &Roodman, D. (2003). New data, new doubts: a comment on burnside and dollar’s ‘aid, policies, and growth’. NBER Working Paper 9846.
Egger, Peter and Hannes Winner (2006) How Corruption Influences Foreign Direct Investment: A Panel Data Study. Economic Development and Cultural Change Vol. 54, No. 2, pp 459-486.
FATF, 2006 Financial Action Task Force (FATF), Financial Action Task Force: Annual Report 2005–2006, FATF, OECD, France (2006).
Feige, Edgar L., and Douglas K. Pearce, (1979). The casual causal relationshipsbetween money and income: Some caveats for time series analysis. Reviewof Economics and Statistics 61 (November): 521 -33.
Financial Action Task Force (FATF), (2005). Annual Report. Paris: Organization for Economic Co-Operation and Development.
Fisher, I., 1911. The Purchasing Power of Money, London: Macmillan.
Fisher, I., 1921. “The Best Form of Index Number,” Journal of the American Statistical Association 17, 535–537.
Fisher, I., 1922. The Making of Index Numbers, Boston: Houghton Mifflin.
Frey B, S,, Weck-Hannemann H. (1984), The hidden economy as an 'unobserved' variable. European Economic Review 26: 33-53.
Gallup, J. L., J. D. Sachs and A. Mellinger (1999), “Geography andeconomic development”, CID at Harvard working paper no. 1.
Georgiou(2007), Measuring the Size of the Informal Economy: A Critical Review CENTRAL BANK OF CYPRUSEurosystem Working paper series 2007-1.
Granger, Clive W. J. (1969), Investigating causal relations by econometric modelsand cross spectral methods. Econometrica 37 (July): 424-38.
Greenidge, K. et al (2008). "Estimating the Size of the Informal Economy in Barbados", Business, Finance & Economics in Emerging Economies" Vol.4 N0. 1, 197-226.
Greenwood, J., y B. Jovanovic, (1990), “Financial Development, Growth, and the Distribution ofIncome” Journal of Political Economy, 98, 1076–1107.
Hansen, Lars Peter, (1982), Large Sample Properties of Generalised Method of Moments Estima- tors," Econometrica50, 1029-1054.
Hejazi, Walid and Edward Safarian (1999): “Trade, foreign direct investment, and R&D spillovers”, Journal of International Business Studies 30(3): 491-511.
Huang, Y. (2005a), “Will political liberalisation bring about financialdevelopment?” Bristol Economics Discussion Paper no. 05/578.
Huang, Y. (2005b), “On the political economy of financial reform”.
Huang, Y. (2005c), “Private investment and …financial development in aglobalised world”.
Huang, Y. and J. R. W. Temple (2005), “Does external trade promotefinancial development?” CEPR discussion paper no. 5150.
Huybens, E. and B.D. Smith (1999), “Inflation, financial markets andlong-run real activity”, Journal of Monetary Economics, 43: 283-315.
Isham, J., M. Woolcock, L. Pritchett and G. Busby (2002), “Thevarieties of rentier experience: How natural resource export structuresand the political economy of economic growth”.
Jaffee, D. and M. Levonian (2001), “Structure of banking systems indeveloped and transition economies”, European Financial Management,7(2): 161-81.
Johansen S. (1998), Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control12, pp. 231–254.
Kaufmann, D. and A. Kaliberda. (1996), 'Integrating the Unofficial Economy into the Dynamics ofPost-Socialist Economies: A Framework for Analysis and Evidence' in Kaminski, B. (ed.)Economic Transition in Russia and the New States of Eurasia, London: M.E. Sharpe, pp. 81-120.
Kamarck, A. M. (1976), The Tropics and Economic Development, JohnHopkins University Press, Baltimore, MD.
La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny, (1997), LegalDeterminants of External Finance, Journal of Finance, 52, 1131-1150.
La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny, (1998), Law andFinance, Journal of Political Economy 106, 1113-1155.
Laeven, L. (2000), “Does financial liberalization reduce financial constraints? World Bank Policy Research working paper no. 2435.
Levine, R. (1997), “Financial development and economic growth: Viewsand agenda”. Journal of Economic Literature, 35: 688-726.
Levine, R. (2003), “More on finance and growth: More finance, moregrowth?” The Federal Reserve Bank of St. Louis.
Levine, R. (2005), “Finance and growth: Theory and evidence”, in P.Aghion and S. N. Durlauf (eds.) Handbook of Economic Growth North-Holland.
Lkhagvajargal (2004) Country Paper: Mongolia, The Size of Non-Observed Economy in Mongolia, Workshop on Assessing and Improving Statistical Quality, Measuring the Non-observed Economy, 11-14 May 2004, Bankok, Thailand.
MacKinnon, J. G., Haug, A. A. &Michelis, L. (1999). Numerical distribution functions of likelihood ratio tests forcointegration. Journal of Applied Econometrics, 14, pp. 563- 577.
Malik, Adeel and Jonathan R. W. Temple (2005). The geography of output volatility. Journal of Development Economics, forthcoming.
Masciandaro, D. (1999) Money laundering: the economics of regulation, European Journal of Law and Economics, 7, no. 3: 225-240.
Masciandaro, D. (2004), The global financial crime: Terrorism, money laundering and offshore centres, Aldershot (Great Britain): Ashgate.
Masciandaro, D. (2004), Unification in Financial Sector Supervision: the Trade offbetweenCentral Bank and Single Authority. Journal of Financial Regulation and Compliance, vol. 12, n.2, 151-169.
Masciandaro, D. and A. Portolano (2002) Inside the black (list) box: Money laundering, lax financialregulation, non-cooperative countries. A law and economics approach. Paulo BaffiCenter,Bocconi University and Bank of Italy.
Masciandaro, D. eds. (2004) Global Financial Crime, Terrorism, Money Laundering and OffshoreCentres, ISPI, Ashgate, Burlington, VT, USA.
Masciandaro, D., and U. Filotti (2001) Money laundering regulation and bank compliance costs:What do your customers know? Economics and the Italian experience, Journal of MoneyLaundering Control, Vol. 5, No. 2, pp. 133-145.
Maurin, A., Sookram, S., and Watson, P. (2006) Measuring the Size of the Hidden Economy in Trinidad & Tobago, 1973-1999.
Mayer, C. and O. Sussman (2001), “The assessment: finance, law andgrowth”, Oxford Review of Economic Policy, 17(4): 457-66.
McKinnon, R. (1973), Money and Capital in Economic Development, Brookings Institution,Washington, District of Columbia.
Merton, Robert and ZviBodie (1995), Financial infrastructure and public policy: a functionalperspective, Working Paper 95-064, Division of Research, Harvard Business School.
Moreira, S. T., (2007), A Two-Period Model of Money Laundering and Organized Crime, Economics Bulletin, Vol. 11, No. 3,1-5.
Pagano, M. and P. Volpin (2001), “The political economy of finance”,Oxford Review of Economic Policy, 17(4): 502-19.
Quirk, Peter J. (1996). Macroeconomic implications of money laundering. In: IMF-Working Paper, 96/ 66.Washington D.C.
RajanR.G.,and L. Zingales (2003b), Saving Capitalism from the Capitalists, Crown Business, New York.
Rajan, Raghuram and Luigi Zingales (2003a), The great reversal: The politics of financialdevelopment in the 20th century, Journal of Financial Economics 69(1), 5-50.
Reuter, P. and Truman, E.M. (2004), Chasing Dirty Money: The Fight Against Money Laundering,Institute for International Economics, Washington, DC.
Sachs, J. and Warner, A. (1995a), ‘Economic Reform and the Process of Global Integration,Brookings Papers on Economic Activity, 0(1), pp.1-95.
Sachs, J. D. (2003a): “Institutions don’t rule: direct effects of geography on percapita income,” NBER Working Paper 9490, National Bureau of Economic Research, Cambridge. Sachs, J. D. (2003b): “Institutions matter, but not for every thing,” Finance andDevelopment, June, 40(2).
Sachs, J.D. and Warner A. (1995b) "Economic Reform and the Process of Global Integration,"Brookings Papers on Economic Activity, 1995:1, pp. 1-118.
Sachs, Jeffrey D., Warner, A. M., (1997). Fundamental sources of long-run growth. American Economic Review 87 (2), 184–188.
Saint-Paul, G. (1991). Dynamic labor demand with dual labor markets. Economics Letters3 6:219-222.
Saint-Paul, G. (1992a). Are the unemployed unemployable? CEPR discussion paper 689.
Saint-Paul, G. (1992b). The high unemployment trap. CEPR discussionpaper 670.
Segura, J., F. Duran, L. Toharia, and S. Bentolila. (1991). Analysis de la Contratacion Temporale en Espana. Madrid: Ministerio de Trabajo.
Schaap, Cees D. (1998). Fighting Money Laundering: With Comments of the Legislation of theNetherlands Antilles and Aruba, London & Boston : Kluwer Law International.
Schneider, Friedrich (2004), The financial flows of Islamic Terrorism, in: Masciandaro,Donato (editor), Global financial crime: Terrorism, money laundering and offshore centres,Aldershot (Great Britain): Ashgate, pp.97-126.
Schumpeter, J. A. (1912), The Theory of Economic Development, Harvard University Press, Cambridge MA.
Shaw, E. (1973), Financial Deepening in Economic Development , Oxford University Press, NewYork.
Stulz, R. M. and R. Williamson (2003), “Culture, openness, and finance”, Journal of financial Economics,70: 313-349.
Takats, Ilöd (2007), A theory of ""crying wolf"": The economics of money launderingenforcement, Paper presented at the conference ""Tackling Money Laundering"", University ofUtrecht, Utrecht (The Netherlands).
Tanzi, V. (1997), Macroeconomic Implications of Money Laundering, in Responding toMoney Laundering, International Perspectives, 91-104. Amsterdam: Harwood AcademicPublishers.
Unger, B., Seigal, M., Ferwerd, J., Kruijg, W. (2006) The Observed Effects of Money Laundering for Jamaica Carribeancentre of money and finance.
Vuletin, G., 2008. Exchange rate regimes and fiscal discipline: The role of capital controls. Mimeo. Colby College.
Wu, Shih-Ying (2006), Corruption and cross-border investment by multinational firms.Journal of Comparative Economics 34, pp. 839–856.
Available Versions of this Item
- Money laundry and financial development. (deposited 31. Aug 2011 15:41) [Currently Displayed]