Are the Shadow Economy and Country Risk Barriers to Financial Development
Evidence From Cross Countries Analysis
Bibliographic Data
This study examines the impact of the shadow economy (SEC) on financial markets and institutions development in N-11 countries, using data from 1995 to 2018. Moreover, the study also examines the moderating role of country risk consisting of political (PR), financial (FR) and economic risk (ER) in shaping financial institutions and market development by managing the SEC. The study used panel unit root and cointegration tests for identifying stationarity and cointegration in the series, followed by the panel autoregressive distributive lag (ARDL) technique to estimate the long-run relationship. The study's empirical analysis reveals that SEC and ER along with FR negatively affect the development of financial markets and institutions. The study also indicated that country risk (PR, ER and FR) moderates the adverse impact of the SEC on financial institutions and market development. Employing the VEC/Block exogeneity causality test, a one-way causal nexus runs from PR to ER, and SEC to economic growth is identified. Furthermore, the study suggests that N-11 countries should reduce shadow economic activities and country risk to promote the development of financial markets and institutions
Causality (physics) · Cointegration · Country risk · Distributed lag · Endogeneity · Financial market · Nexus (standard) · Panel data · Shadow (psychology) · COVID-19 Pandemic Impacts · Fiscal Policy and Economic Growth · Taxation and Compliance Studies
Econometric Analysis of Panel Data
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Bank-Based or Market-Based Financial Systems
The Twin Crises
Shadow Economies
General Diagnostic Tests for Cross Section Dependence in Panels
Unit root tests in panel data
Testing for unit roots in heterogeneous panels
Panel Cointegration
Spurious regression and residual-based tests for cointegration in panel data
Bounds testing approaches to the analysis of level relationships
Investigating Causal Relations by Econometric Models and Cross-spectral Methods
Political Instability and the Informal Economy
Corruption and the shadow economy
Financial Development and Economic Growth in Underdeveloped Countries
Do shadow economy, institutional regulatory framework, government stability, and corruption affect non-performing banking loans in emerging market economies
Stock Market Linkages in Emerging Asia-Pacific Markets
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