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Can Corruption Be Measured? Bank Offers Diagnostic Tools to Measure and Combat Corruption in Member Countries

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by Bank's World staff (published in Bank's World, June 1999)

This paper investigates whether resident enterprise managers have an informational advantage about the countries they work on. The authors propose a method for extracting information available to resident managers, but unknown to investors and forecasters. The authors test this informational advantage hypothesis by using a unique data set, the Global Competitiveness Survey. The survey asks local managers about their outlook for the country in which they reside. The authors find that local managers have private information. Their responses improve conventional forecasts of future volatility and changes in the exchange rate, which are based on economic fundamentals or interest rate differentials. When looking at the recent crises, the authors find that the local business community perceived the crisis in advance in Korea, Thailand, and Russia, but not in Indonesia and Malaysia.

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