Financial Reforms and Corruption: Evidence Using GMM Estimation

28 Pages Posted: 4 Feb 2018 Last revised: 26 Mar 2019

Date Written: January 1, 2018

Abstract

This paper assesses the impact of financial reforms on corruption using a panel of 87 countries for 1984-2005. To account for the dynamic nature and high persistence of corruption, the paper employs the difference and system generalized method of moments (GMM) estimators. It finds that policy reforms targeted towards financial liberalization reduce corruption. This result is robust to the inclusion of a number of control variables and the choice of the GMM estimator. Interestingly, the financial liberalization index is found to be positively correlated with corruption though this relationship is not robust. The findings also indicate that legal origins do not impose a binding constraint on the effectiveness of financial reforms in reducing corruption.

Keywords: Corruption, Financial Reforms, Government Size, Legal Origins, Liberalization, Openness

JEL Classification: D73, G28, K42, O16

Suggested Citation

Jha, Chandan Kumar, Financial Reforms and Corruption: Evidence Using GMM Estimation (January 1, 2018). International Review of Economics & Finance, Vol. 62, 2019., Available at SSRN: https://ssrn.com/abstract=3110344 or http://dx.doi.org/10.2139/ssrn.3110344

Chandan Kumar Jha (Contact Author)

Le Moyne College ( email )

Syracuse, NY 13214
United States

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