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Corruption and Public Sector Borrowing in EU Transition Economies: A Panel Causality Analysis

Corruption and Public Sector Borrowing in EU Transition Economies: A Panel Causality Analysis
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Author(s): Omer Faruk Ozturk (Faculty of Economics and Administrative Sciences, Usak University, Turkey)
Copyright: 2021
Pages: 11
Source title: Handbook of Research on Institutional, Economic, and Social Impacts of Globalization and Liberalization
Source Author(s)/Editor(s): Yilmaz Bayar (Bandirma Onyedi Eylul University, Turkey)
DOI: 10.4018/978-1-7998-4459-4.ch035

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Abstract

Corruption can be expressed as the abuse of public power for specific purposes and goals. The corruption in the public sector occurs as a result of state employees acting upon the private interests rather than public interest. The public borrowing policy is important for ensuring and maintaining the economic stability in a country. The high level of public borrowing is one of the important factors leading macroeconomic instability. Many institutional, economic, social, and political factors have been revealed as the determinants of public sector borrowing level. In this study, the causality relationship between corruption and public debt in 11 EU transition economies for the period of 2002-2017 was analyzed through causality tests of Kónya and Dumitrescu and Hurlin. Kónya panel bootstrap causality test revealed a one-way causality from public debt borrowing to corruption Croatia, Czechia, Hungary, Romania, and Slovenia and a one-way causality from corruption to public debt borrowing in Bulgaria, Estonia, Lithuania, Poland, Slovakia, and Slovenia. The Dumitrescu and Hurlin causality test discovered a bidirectional causality relationship between public debt borrowing and corruption.

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