EconPapers    
Economics at your fingertips  
 

Does easy availability of cash affect corruption? Evidence from a panel of countries

Sunny Kumar Singh and Kaushik Bhattacharya

Economic Systems, 2017, vol. 41, issue 2, 236-247

Abstract: Using annual panel data of 54 countries for the period 2005-14, we examine whether currency in circulation, both aggregate and in large denominations, affects the level of corruption in a country. Standard panel data models suggest that the ratios of (i) aggregate currency in circulation to M1 and, (ii) large denomination banknotes to M1 are both statistically significant determinants of corruption. Tests for reverse causality within a panel Granger framework reveal a uni-directional causality of corruption with the first variable, but a bi-directional one with the second. These findings suggest that a limitation in the supply of high-denomination banknotes, inter alia, could be a tool to fight corruption, and bring to the fore the important role of payment systems, extending an earlier study by Goel and Mehrotra (2012). The results also highlight that, along with the government, the central bank of an economy can also play an important role in the fight against corruption.

Keywords: Control of corruption index; ICRG corruption index; Currency in circulation; Large denomination banknotes; Static panel data model; Dynamic panel data model; Panel Granger causality (search for similar items in EconPapers)
JEL-codes: D73 E51 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362517300092
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:41:y:2017:i:2:p:236-247

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Series data maintained by Dana Niculescu ().

 
Page updated 2017-09-29
Handle: RePEc:eee:ecosys:v:41:y:2017:i:2:p:236-247