Abstract
This study empirically investigates the effect of corruption on public debt in selected Asian and African developing countries over the time period 1990-2016. The System Generalized Method of Moment (GMM) technique is applied on the three measures of corruption by ICRG, transparency International and Worldwide Governance Indicators. The findings suggest that corruption leads to high public debt accumulation in Asian and African countries both however the magnitude of the effect is relatively higher in African region than Asian. The study found the role of institutional quality as mitigating one in the corruption-debt relationship. And the computed threshold level of institutional quality provides us a benchmark that can offset the adverse effect of corruption on public debt. The study also elucidate the findings by computing the marginal effects of corruption on public debt at various levels of country-specific institutional quality The findings suggest to opt effective measures to combat corruption in order to reduce public debt burden. A strong judicial system with successful implementation of anti-corruption strategies and improving the institutional quality can reduce the act of corruption and hence the public debt.
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Article Details
- Year: 2021
- Volume: 42
- Issue: 3
- Pages: 59 - 90
- Accepted: 25.05.2021
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DOI:
https://doi.org/10.5281/zenodo.17052895 -
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How to Cite?
Mariam Naz, Bushra Yasmin (2021). Corruption and Public Debt in Developing Countries: Role of Institutional Quality. Journal of Economic Cooperation and Development, 42(3), 59-90. https://doi.org/10.5281/zenodo.17052895
