Financial Deepening, Economic Growth and Corruption: The Case of Islamic Banking

Piyadasa Edirisuriya

Review of Economics & Finance, 2017, vol. 8, 1-16

Abstract: As Islamic banking is becoming popular among bank customers, attempts are made in this study to examine the relationship between the corruption level and financial market deregulation, which causes financial deepening, using data for Islamic banks in 14 countries. This study employs a panel data analysis and uses three variables to represent the corruption level: the World Bank¡¯s control of corruption index (Cor), Transparency International¡¯s corruption perception index (Cor-per) and Heritage Foundation¡¯s corruption perception data (Cor-hf). Using fixed effect regression, the results of this study support the viewpoint that there is no significant positive relationship between the corruption level and financial deepening in countries where Islamic banking is dominant. This finding could help policy makers and regulators to implement further deregulatory measures in these countries.

Keywords: Islamic banking; Deregulation; Financial deepening; Corruption; panel data analysis; Economic growth (search for similar items in EconPapers)
JEL-codes: A10 D73 G10 G18 (search for similar items in EconPapers)
Date: 2017
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