The Effect of Economic and Social Indicators on Money Laundering Attractiveness: The Complementary Role of Institutional Governance

Wahaj Ahmed Khan and Danish Ahmed Siddiqui

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: The paper examines the systemic determinants of Money Laundering Attractiveness (MLA) and its effects taking place in 154 countries during 21 years using panel regressions. The findings suggested that trade openness, especially exports, raises MLA, which increases the volume of trade due to 'distorted' means in most cases. The impact of the MLA on GDP growth is negative, but its effect on inflation and current account balances is relatively insignificant. Socio-economically, life expectancy is the only statistically significant variable in predicting MLA, and reverse causality indicates that perceived gains in literacy, health, and poverty are blinding to potential deficiencies in governance. Institutionally, high-quality democracies appear to lower MLA, including with an increasingly independent judiciary, while good laws and rule-based regulations paradoxically draw MLA where enforcement capabilities are weak. Furthermore, the moderating effect of Worldwide Governance Indicators (WGI) is also evident. These results emphasize the importance of well-rounded anti-money laundering (AML) measures that go beyond formal regulation and incorporate the quality of the institutions, cultural matters, and informal economic activities. The study further underlines the need for targeted governance reforms and stronger enforcement in high-capacity systems vulnerable to exploitation. Integrating AML efforts with development strategies is essential to prevent illicit flows from distorting real progress.

Keywords: AML Measures; Governance; Money Laundering Attractiveness; Shadow Economy; Socio-economically (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/341067/1/U ... g-Attractiveness.pdf (application/pdf)

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:zbw:esprep:341067

Access Statistics for this paper

More papers in EconStor Preprints from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().