Financial Settlement Modes and Corruption: Evidence from Developed Nations

22 Pages Posted: 2 May 2011

See all articles by Aaron N. Mehrotra

Aaron N. Mehrotra

Bank for International Settlements (BIS)

Rajeev K. Goel

Illinois State University - Department of Economics

Date Written: April 4, 2011

Abstract

Using recent pooled data from several developed nations, the paper uniquely examines whether the composition of payment instruments has a bearing on the prevalence of corruption in a country. Our results suggest that the choice of instruments matters. Paper credit transfer transactions are consistently associated with corrupt activities, while credit card transactions tend to reduce them. Cheques generally increase corruption, the results with respect to nonpaper credit transfers are mixed, while direct debits fail to show significant effects on corruption. These findings hold for alternative corruption measures and when allowance is made for endogeneity of payment instruments.

Keywords: corruption, cheques, credit card, cash, direct debit, payment instruments

JEL Classification: K4, G3, H3, F3

Suggested Citation

Mehrotra, Aaron N. and Goel, Rajeev K., Financial Settlement Modes and Corruption: Evidence from Developed Nations (April 4, 2011). BOFIT Discussion Paper No. 4/2011. Available at SSRN: https://ssrn.com/abstract=1825083 or http://dx.doi.org/10.2139/ssrn.1825083

Aaron N. Mehrotra

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Rajeev K. Goel (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States

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