Corruption, soundness of the banking sector, and economic growth: A cross-country study

Junghee Park

Journal of International Money and Finance, 2012, vol. 31, issue 5, 907-929

Abstract: This paper explores the impact of corruption on both the banking sector and economic growth; we determine the impact using 76 macroeconomic data from various countries over the period 2002–2004. The results of various cross-sectional regressions provide substantial evidence that corruption significantly aggravates the problems with bad loans in the banking sector. In this study, we also find some evidence of a new channel through which corruption lowers economic growth: Corruption distorts the allocation of bank funds from normal projects to bad projects, which decreases the quality of private investments, hence it decreases economic growth.

Keywords: Non-performing loans; Corruption perception index; Financial crisis; Economic Growth (search for similar items in EconPapers)
JEL-codes: G21 H7 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:31:y:2012:i:5:p:907-929

DOI: 10.1016/j.jimonfin.2011.07.007

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