Fiscal policy and shadow economy in Asian developing countries: does corruption matter?

Huynh, Cong Minh; Nguyen, Tan Loi

doi:10.1007/s00181-019-01700-w

Cited by 45 publications

(31 citation statements)

References 37 publications

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“…The adverse impact of rule of law on shadow economy was found in transition countries supports the point of views that institutional quality is a main element to determine the shadow economy which is empirically confirmed by researches which are investigated in 19 developing Asian countries (Huynh & Nguyen, 2019) and 37 developing Asian countries (Jamalmanesh et al, 2014) or bigger sample data with 57 countries (Torgler & Schneider, 2009), 145 countries including developing, transition, highly developed OECD countries (Dreher et al, 2009), and 157 countries (Hassan & Schneider, 2016).…”

Section: Resultssupporting

confidence: 69%

“…This result is not the same as the researches of Nikopour, Habibullah, Schneider, and Law (2009); ; and Ali and Bohara (2017) which find that higher FDI level lead to a decrease in the size of shadow economy. A huge number of previous studies also reveal that more corruption is one of the reasons which increases shadow economy size (Johnson, Kaufmann, & Zoido-Lobaton, 1998;Dreher et al, 2009;Huynh & Nguyen, 2019). However, there is a drawback point which needs to be discussed that these studies focus only on a specific country or using a general research sample data which are no distinction between countries by developed, developing, transition or non-transition.…”

Section: Resultsmentioning

confidence: 99%

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Rule of Law, Economic Growth and Shadow Economy in Transition Countries

Luong¹,

Nguyen²,

Nguyen³

2020

JAFEB

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The paper aims to investigate the interactions between rule of law, economic growth and the shadow economy in 18 selected transition economies. This study uses annual data over the period 2002-2015 for 18 transition countries to estimate the effects of rule of law and other factors on the size of shadow economy. The transition country group is classified based on International Monetary Fund resources and is selected on the basis of the availability of data. The data examined in this research are derived from the World Bank, Worldwide Governance Indicators project and Working Paper from International Monetary Fund. This study employs GMM method. The results show that the economic growth indicators have negative and statistically significant impact on the shadow economy. Additionally, these results also reveal that in transition countries the size of shadow economy is negatively related to the quality of rule of law. However, the findings of this research also point out that there are positive relationships between inflation, public expenditure and the size of shadow economy. Hence the results from this study suggest that the size of shadow economy could be controlled by improving the effectiveness of rule of law and the growth of economy particularly in transition countries.

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Section: Resultssupporting

confidence: 69%

Section: Resultsmentioning

confidence: 99%

Rule of Law, Economic Growth and Shadow Economy in Transition Countries

Luong¹,

Nguyen²,

Nguyen³

2020

JAFEB

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“…The concept of shadow economy can as well be called illegal economy, black economy, undeclared economy, unrecorded economy, unreported economy and informal economy. In shadow economy, illegal activities are very easy to perpetrate and the usual practice may as well include non- declaration of income acquired from production of legal goods and services (Goel and Saunoris, 2018; Huynh and Nguyen, 2019). Thus, shadow economy deals with all economic activities that would generally be taxable but are not presented to the tax authorities.…”

Section: Literature Reviewmentioning

confidence: 99%

Shadow economy in Africa: how relevant is financial inclusion?

Ajide

2021

JFRC

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Purpose This study aims to investigate the possible relationship between financial inclusion and shadow economy in selected African countries. Design/methodology/approach The study uses panel data estimation technique and Toda and Yamamoto causality approach. The data of selected African counties over a period of 2005–2015 are sourced from World Bank Development Indicators, International Monetary Fund International Financial statistics database and International Country Risk Guide. Findings The results show that financial inclusion reduces the size of shadow economy. The causality results show that there is a unidirectional causality moving from financial inclusion to shadow economy. The results demonstrate that a country with lower level of corruption and higher level of growth can benefit more in reducing the size of shadow economy through financial inclusion. Originality/value This study provides the first evidence of the link between financial inclusion and shadow economy from the Sub-Saharan Africa perspective. The study suggests that financial inclusion may be useful in affecting the size of shadow economy in Africa.

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“…On the one hand, countries with high informality need to introduce larger economic packages since their business activities are more fragile and they have more citizens who are in need (Elgin, 2020 ). On the other hand, these countries' negative characteristics, such as lack of resources and institutional ineffectiveness, prevent the introduction of sizable stimulus packages (Elgin, 2020 ; Huynh & Nguyen, 2020 ). In this paper, specifically, a novel dataset is used to study governments' different policy responses to the COVID‐19 pandemic.…”

Section: Introductionmentioning

confidence: 99%

Fiscal stimulus packages to COVID‐19: The role of informality

Elgin

Williams

Oz‐Yalaman

et al. 2022

J of Intl Development

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In this paper, we use a novel cross‐country dataset to investigate the relationship between the prevalence of the shadow economy and fiscal policy responses to the economic crisis induced by the pandemic. The finding is that countries with a relatively larger shadow economy before the pandemic have adopted a smaller fiscal policy package. The results are robust to different econometric specifications, including an instrumental variable estimation. This reinforces the wider literature that countries (especially those with larger shadow economies) generally follow a procyclical policy as opposed to the optimal and countercyclical one.

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Fiscal policy and shadow economy in Asian developing countries: does corruption matter?

Cited by 45 publications

References 37 publications

Rule of Law, Economic Growth and Shadow Economy in Transition Countries

Rule of Law, Economic Growth and Shadow Economy in Transition Countries

Shadow economy in Africa: how relevant is financial inclusion?

Fiscal stimulus packages to COVID‐19: The role of informality

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