Corruption and determinants of fiscal deficits in Asia Pacific countries

Abstract

The fiscal policy conducting with the aim of sustainable development is under strong debate from both scholar and practice, in which the institution-based solutions for the fiscal consolidation are suggested as essential measures to complement for the ineffective of market-based solutions. The study contributes to the literature and practice by emphasizing the roles of corruption controlling on fiscal deficits in the context of 26 Asia Pacific countries for the period 2002 – 2015. By recruiting the system-GMM estimators for unbalance panel data, the study finds the significant evidences that the better corruption controlling eliminates fiscal deficits. Notably, the corruption controlling measures have stronger effects in low indebted countries with small government size. The result has significant implications for policymakers in fiscal consolidation and sustainable policy setting.