The wave of corporate governance scandals will cost the US economy $35 billion (€35 billion), as much as a $10-a-barrel rise in the price of oil, according to research released yesterday.

Economists at Brookings Institution, the Washington think-tank, said their conservative estimate was that the scandals would take 0.34 per cent off GDP in a year. That would equal the annual cost of government spending on homeland security or a $10-a-barrel oil price rise, they said.

Ms Carol Graham, director of governance studies at the institution, said the depressing effect on share prices and hence consumption was the main way the scandals would affect the economy.

If the falls in stock prices this year were not reversed, the scandals could take 1 per cent to 2.5 per cent off the economy over the next 10 years, the report said. Lower stock prices would also reduce investment through increasing the cost of capital.