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The Relationship Between the Shadow Economy and Financial Depth: The Application of the Panel of Nonlinear Autoregressive Distributed Lag (Panel NARDL)
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Hossein Amiri *1   , Mahdi Ghaemi Asl2 , Masoumeh Barazandeh3 |
1- Kharazmi University & University of Kharazmi, Tehran, Iran
2- Faculty Member of Economics, University of Kharazmi, Tehran, Iran
3- Kharazmi University |
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Abstract: (97 Views) |
One of the important factors for economic prosperity and growth is having a deep and developed financial market. The financial market, as one of the important economic sectors, has an undeniable connection with the shadow economy. The existence of the shadow or hidden economy has serious effects on the economic growth and development of any country, including financial deepening. Therefore, it is reasonable to conclude that the existence of the shadow economy destroys the formal economy and negatively affects the performance of the financial market. The main goal of this research is to investigate the effect of the shadow economy on financial depth during the period from 2003 to 2018 in the short and long term, using the Panel of Nonlinear Autoregressive Distributed Lag (Panel NARDL). The results show the existence of an asymmetric (non-linear) relationship in the long term between the shadow economy and financial depth in selected countries with a similar financial system. The negative and positive shock of the shadow economy has had a positive and significant effect on the financial depth, and in the short term, despite the negative effect, it does not have a significant effect. Therefore, the selected countries can prevent the increase in the size of the shadow economy to maintain the current level of financial depth and increase it through the control of illegal activities and by designing an efficient financial system as well as amending the laws in the long term, act towards the identification of existing illegal activities and their gradual reduction.
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Article number: 1 |
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Full-Text [PDF 796 kb]
(130 Downloads)
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Type of Study: Empirical Study |
Subject:
Monetary Policy, Central Banking, and the Supply of Money and Credit (E5)
Received: 2024/03/15 | Accepted: 2024/08/3 | Published: 2024/09/11
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