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Does Shadow Economy Restrain Financial Sector Development?

Year 2022, Volume: 7 Issue: 3, 713 - 725, 30.09.2022
https://doi.org/10.30784/epfad.1132075

Abstract

The shadow economy is a common feature in both developed and developing countries and has serious implications for macroeconomic performance. The current literature mainly focuses on the size and determinant of the shadow economy in an economy and its impact on economic growth, fiscal income and budget performance. On the other hand, a limited number of studies had conducted on the interaction between the shadow economy and financial development as the field of shadow finance. However, there is no consensus in the literature that the shadow economy could affect the development of the organized finance sector positively or negatively. Negative opinion is generally based on the idea that economic agents without access to the shadow financial sector may prefer to take advantage of shadow financial opportunities. This situation causes the expansion of unorganized financial markets on the one hand and the contraction of the organized finance sector on the other. Despite the negative opinion, the positive opinion stems from the thought that the shadow economy will reduce the pressure on the organized finance sector. The aim of this study is to examine the impact of the shadow economy on the development of the financial sector for 18 Upper-Middle Income countries. For this reason, the data between 1991 and 2017 were analyzed using the Common Associated Effects Mean Group (CCEMG) estimator, which is one of the Panel Error Correction models. As a result, it is seen that the effect of the informal economy on financial sector development is negative in the long run. 

References

  • Abu-Lila, Z., Ajlouni, S. and Ghazo, A. (2021). Nonlinearity between financial development and the shadow economy: Evidence from Jordan. Accounting, 7(5), 1049-1054. doi:10.5267/j.ac.2021.3.004
  • Aga, G.A. and Reilly, B. (2011). Access to credit and informality among micro and small enterprises in Ethiopia. International Review of Applied Economics, 25(3), 313-329. https://doi.org/10.1080/02692171.2010.498417
  • Ajide, F.M. (2021). Shadow economy in Africa: How relevant is financial inclusion? Journal of Financial Regulation and Compliance, 29(3), 297-316. https://doi.org/10.1108/JFRC-10-2020-0095
  • Bayar, Y. ve Ozturk, O.F. (2016). Financial development and shadow economy in European Union transition economies. Managing Global Transitions: International Research Journal, 14(2). Retrieved from https://www.fm-kp.si/
  • Berdiev, A.N. and Saunoris, J.W. (2016). Financial development and the shadow economy: A panel VAR analysis. Economic Modelling, 57, 197-207. https://doi.org/10.1016/j.econmod.2016.03.028
  • Bittencourt, M., Gupta, R. and Stander, L. (2014). Tax evasion, financial development and inflation: Theory and empirical evidence. Journal of Banking & Finance, 41, 194–208. https://doi.org/10.1016/j.jbankfin.2014.01.009
  • Blackburn, K., Bose, N. and Capasso, S. (2012). Tax evasion, the shadow economy and financial development. Journal of Economic Behavior & Organization, 83, 243–53. https://doi.org/10.1016/j.jebo.2012.05.019
  • Bose, N., Capasso, S. and Wurm, M.A. (2012). The impact of banking development on the size of shadow economies. Journal of Economic Studies, 39 (6), 620–38. doi:10.1108/01443581211274584
  • Breusch, T.S. and Pagan, A.R. (1980). The Lagrange multiplier test and its applications to model specification tests in econometrics. Review of Economic Studies, 47, 239-53. https://doi.org/10.2307/2297111
  • Canh, N.P. and Thanh, S.D. (2020). Financial development and the shadow economy: A multi-dimensional analysis. Economic Analysis and Policy, 67, 37-54. https://doi.org/10.1016/j.eap.2020.05.002
  • Capasso, S. and Jappelli, T. (2013). Financial development and the shadow economy. Journal of Development Economics, 101, 167–78. https://doi.org/10.1016/j.jdeveco.2012.10.005
  • Dabla‐Norris, E.R.A. and Feltenstein, A. (2005). The underground economy and its macroeconomic consequences. The Journal of Policy Reform, 8(2), 153-174. https://doi.org/10.1080/13841280500086388
  • Din, B.H. (2016). Estimating the determinants of shadow economy in Malaysia. Geografia, 12(5). Retrieved from http://www.ukm.edu.my/
  • Elgin, C. and Uras, B.R. (2013). Is informality a barrier to financial development? SERIEs, 4(3), 309-331. doi:10.1007/s13209-012-0092-9
  • Ellul, A., Jappelli, T., Pagano, M. and Panunzi, F. (2012). Transparency, tax pressure and access to finance (CEPR Discussion Papers No. 8939). https://doi.org/10.1093/rof/rfv005
  • Gatti, R. and Honorati, M. (2008). Informality among formal firms: Firm-level, cross-country evidence on tax compliance and access to credit (World Bank Policy Research Working Paper No. 4476). Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1083904
  • Gharleghi, B. and Jahanshahi, A.A. (2020). The shadow economy and sustainable development: The role of financial development. Journal of Public Affairs, 20(3), 2099. https://doi.org/10.1002/pa.2099
  • GİB. (2009). Kayıt dışı ekonomiyle mücadele stratejisi eylem planı (2008 – 2010). Erişim adresi: http://www.gib.gov.tr/fileadmin/beyannamerehberi/Kayit_disi_2009tr.pdf.
  • Gobbi, G. and Zizza. R. (2007). Does the underground economy hold back financial deepening? Evidence from the Italian credit market (CEP Discussion Paper No. 789). Retrieved from http://eprints.lse.ac.uk/19731/1/Does_the_Underground_Economy_Hold_Back_Financial_Deepening_Evidence_from_the_Italian_Credit_Market.pdf
  • Gylys, P. (2005). Economy, anti-economy, underground economy: Conceptual and terminological problems. Ekonomika, 72, 1–11. Retrieved from https://etalpykla.lituanistikadb.lt/
  • Hajilee, M. and Niroomand, F. (2021). Is there an asymmetric link between the shadow economy and the financial depth of emerging market economies? The Journal of Economic Asymmetries, 23, e00193. https://doi.org/10.1016/j.jeca.2020.e00193
  • Mar'i, M. and Cavusoglu, B. (2021). Shadow economy, economic growth and financial development. Research Square, Advance online publication. https://doi.org/10.21203/rs.3.rs-150324/v1
  • Önder, İ. (2001). Kayıt dışı ekonomi ve vergileme. İstanbul Üniversitesi Siyasal Bilgiler Fakültesi Dergisi, 23-24, 241-254. Erişim adresi: https://dergipark.org.tr/tr/pub/siyasal
  • Pant, M., Chowdhury, P.R. and Singh, G. (2009). Financial intermediation and employment. Review of Market Integration, 1, 61–82. https://doi.org/10.1177/097492920900100104
  • Pesaran, M.H. (2003). General diagnostic tests for cross-sectional dependence in panels (CESifo Working Paper Series No. 1229). Retrieved from https://doi.org/10.1007/s00181-020-01875-7
  • Pesaran, M.H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica, 74(4), 967-1012. https://doi.org/10.1111/j.1468-0262.2006.00692.x
  • Pesaran, M.H. (2007). A simple panel root test in the presence of cross section dependence. Journal of Applied Econometrics, 22, 265-312. https://doi.org/10.1002/jae.951
  • Schneider, F. (2005). Shadow economies around the world: What do we really know? European Journal of Political Economy, 21(3), 598-642. https://doi.org/10.1016/j.ejpoleco.2004.10.002
  • Schneider, F. (2012). The shadow economy and work in the shadow: What do we (not) know? (IZA Discussion Paper No. 6423). Retrieved from http://dx.doi.org/10.2139/ssrn.2031951
  • Schneider, F. and Enste, D. H. (2000). Shadow economies: Size, causes, and consequences. Journal of Economic Literature, 38(1), 77-114. doi:10.1257/jel.38.1.77
  • Singh, A., Jain-Chandra, S. and Mohommad, A. (2012). Out of the shadows. Finance & Development, 49(2), 42–45. https://doi.org/10.5089/9781451922202.022
  • Teobaldelli, D. (2011). Federalism and the shadow economy. Public Choice, 146(3), 269-289. doi:10.1007/s11127-009-9590-0
  • Williams, C.C. and Schneider, F. (2013). The shadow economy. London: Institute of Economic Affairs.
  • Yerdelen Tatoğlu, F. (2020). Panel zaman serileri analizi Stata uygulamalı (3.bs.) İstanbul: Beta Yayıncılık.

Kayıt Dışı Ekonomi Finansal Sektörün Gelişimini Kısıtlıyor mu?

Year 2022, Volume: 7 Issue: 3, 713 - 725, 30.09.2022
https://doi.org/10.30784/epfad.1132075

Abstract

Kayıt dışı ekonomi, hem gelişmiş hem de gelişmekte olan ülkelerde yaygın bir özelliktir ve makroekonomik performans üzerinde ciddi etkileri vardır. Mevcut literatür esas olarak bir ekonomideki kayıt dışı ekonominin boyutu ve belirleyicisi ile ekonomik büyüme, mali gelir ve bütçe performansı üzerindeki etkisine odaklanmaktadır. Kayıt dışı finans alanında ise kayıt dışı ekonomi ve finansal gelişme arasındaki etkileşim üzerine sınırlı sayıda çalışma yapılmıştır. Oysaki literatürde kayıt dışı ekonominin, organize finans sektörünün gelişimini olumlu ya da olumsuz etkileyebileceğine dair fikir birliğine varılamamıştır. Olumsuz görüşler; resmi finans sektörüne erişimi olmayan ekonomik ajanların, resmi olmayan finansal fırsatlardan yararlanmayı tercih edebilme fikrine dayanmaktadır. Bu durum bir yandan organize olmayan finansal piyasaların genişlemesine, diğer yandan organize finans sektörünün daralmasına yol açmaktadır. Olumlu görüşler ise kayıt dışı ekonominin organize finans sektörü üzerindeki baskıyı azaltacağı düşüncesinden kaynaklanmaktadır. Bu çalışmanın amacı, 18 Üst-Orta Gelirli ülkeler için kayıt dışı ekonominin, finansal sektörün gelişimi üzerindeki etkisini incelemektir. Bu nedenle çalışmada 1991-2017 yılları arası verileri, Panel Hata Düzeltme modellerinden biri olan Ortak İlişkili Etkiler Ortalama Grup (CCEMG) tahmincisi kullanılarak analiz edilmiştir. Sonucunda ise kayıt dışı ekonominin finansal sektör gelişimi üzerindeki etkisinin uzun dönemde negatif olduğu görülmüştür. 

References

  • Abu-Lila, Z., Ajlouni, S. and Ghazo, A. (2021). Nonlinearity between financial development and the shadow economy: Evidence from Jordan. Accounting, 7(5), 1049-1054. doi:10.5267/j.ac.2021.3.004
  • Aga, G.A. and Reilly, B. (2011). Access to credit and informality among micro and small enterprises in Ethiopia. International Review of Applied Economics, 25(3), 313-329. https://doi.org/10.1080/02692171.2010.498417
  • Ajide, F.M. (2021). Shadow economy in Africa: How relevant is financial inclusion? Journal of Financial Regulation and Compliance, 29(3), 297-316. https://doi.org/10.1108/JFRC-10-2020-0095
  • Bayar, Y. ve Ozturk, O.F. (2016). Financial development and shadow economy in European Union transition economies. Managing Global Transitions: International Research Journal, 14(2). Retrieved from https://www.fm-kp.si/
  • Berdiev, A.N. and Saunoris, J.W. (2016). Financial development and the shadow economy: A panel VAR analysis. Economic Modelling, 57, 197-207. https://doi.org/10.1016/j.econmod.2016.03.028
  • Bittencourt, M., Gupta, R. and Stander, L. (2014). Tax evasion, financial development and inflation: Theory and empirical evidence. Journal of Banking & Finance, 41, 194–208. https://doi.org/10.1016/j.jbankfin.2014.01.009
  • Blackburn, K., Bose, N. and Capasso, S. (2012). Tax evasion, the shadow economy and financial development. Journal of Economic Behavior & Organization, 83, 243–53. https://doi.org/10.1016/j.jebo.2012.05.019
  • Bose, N., Capasso, S. and Wurm, M.A. (2012). The impact of banking development on the size of shadow economies. Journal of Economic Studies, 39 (6), 620–38. doi:10.1108/01443581211274584
  • Breusch, T.S. and Pagan, A.R. (1980). The Lagrange multiplier test and its applications to model specification tests in econometrics. Review of Economic Studies, 47, 239-53. https://doi.org/10.2307/2297111
  • Canh, N.P. and Thanh, S.D. (2020). Financial development and the shadow economy: A multi-dimensional analysis. Economic Analysis and Policy, 67, 37-54. https://doi.org/10.1016/j.eap.2020.05.002
  • Capasso, S. and Jappelli, T. (2013). Financial development and the shadow economy. Journal of Development Economics, 101, 167–78. https://doi.org/10.1016/j.jdeveco.2012.10.005
  • Dabla‐Norris, E.R.A. and Feltenstein, A. (2005). The underground economy and its macroeconomic consequences. The Journal of Policy Reform, 8(2), 153-174. https://doi.org/10.1080/13841280500086388
  • Din, B.H. (2016). Estimating the determinants of shadow economy in Malaysia. Geografia, 12(5). Retrieved from http://www.ukm.edu.my/
  • Elgin, C. and Uras, B.R. (2013). Is informality a barrier to financial development? SERIEs, 4(3), 309-331. doi:10.1007/s13209-012-0092-9
  • Ellul, A., Jappelli, T., Pagano, M. and Panunzi, F. (2012). Transparency, tax pressure and access to finance (CEPR Discussion Papers No. 8939). https://doi.org/10.1093/rof/rfv005
  • Gatti, R. and Honorati, M. (2008). Informality among formal firms: Firm-level, cross-country evidence on tax compliance and access to credit (World Bank Policy Research Working Paper No. 4476). Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1083904
  • Gharleghi, B. and Jahanshahi, A.A. (2020). The shadow economy and sustainable development: The role of financial development. Journal of Public Affairs, 20(3), 2099. https://doi.org/10.1002/pa.2099
  • GİB. (2009). Kayıt dışı ekonomiyle mücadele stratejisi eylem planı (2008 – 2010). Erişim adresi: http://www.gib.gov.tr/fileadmin/beyannamerehberi/Kayit_disi_2009tr.pdf.
  • Gobbi, G. and Zizza. R. (2007). Does the underground economy hold back financial deepening? Evidence from the Italian credit market (CEP Discussion Paper No. 789). Retrieved from http://eprints.lse.ac.uk/19731/1/Does_the_Underground_Economy_Hold_Back_Financial_Deepening_Evidence_from_the_Italian_Credit_Market.pdf
  • Gylys, P. (2005). Economy, anti-economy, underground economy: Conceptual and terminological problems. Ekonomika, 72, 1–11. Retrieved from https://etalpykla.lituanistikadb.lt/
  • Hajilee, M. and Niroomand, F. (2021). Is there an asymmetric link between the shadow economy and the financial depth of emerging market economies? The Journal of Economic Asymmetries, 23, e00193. https://doi.org/10.1016/j.jeca.2020.e00193
  • Mar'i, M. and Cavusoglu, B. (2021). Shadow economy, economic growth and financial development. Research Square, Advance online publication. https://doi.org/10.21203/rs.3.rs-150324/v1
  • Önder, İ. (2001). Kayıt dışı ekonomi ve vergileme. İstanbul Üniversitesi Siyasal Bilgiler Fakültesi Dergisi, 23-24, 241-254. Erişim adresi: https://dergipark.org.tr/tr/pub/siyasal
  • Pant, M., Chowdhury, P.R. and Singh, G. (2009). Financial intermediation and employment. Review of Market Integration, 1, 61–82. https://doi.org/10.1177/097492920900100104
  • Pesaran, M.H. (2003). General diagnostic tests for cross-sectional dependence in panels (CESifo Working Paper Series No. 1229). Retrieved from https://doi.org/10.1007/s00181-020-01875-7
  • Pesaran, M.H. (2006). Estimation and inference in large heterogeneous panels with a multifactor error structure. Econometrica, 74(4), 967-1012. https://doi.org/10.1111/j.1468-0262.2006.00692.x
  • Pesaran, M.H. (2007). A simple panel root test in the presence of cross section dependence. Journal of Applied Econometrics, 22, 265-312. https://doi.org/10.1002/jae.951
  • Schneider, F. (2005). Shadow economies around the world: What do we really know? European Journal of Political Economy, 21(3), 598-642. https://doi.org/10.1016/j.ejpoleco.2004.10.002
  • Schneider, F. (2012). The shadow economy and work in the shadow: What do we (not) know? (IZA Discussion Paper No. 6423). Retrieved from http://dx.doi.org/10.2139/ssrn.2031951
  • Schneider, F. and Enste, D. H. (2000). Shadow economies: Size, causes, and consequences. Journal of Economic Literature, 38(1), 77-114. doi:10.1257/jel.38.1.77
  • Singh, A., Jain-Chandra, S. and Mohommad, A. (2012). Out of the shadows. Finance & Development, 49(2), 42–45. https://doi.org/10.5089/9781451922202.022
  • Teobaldelli, D. (2011). Federalism and the shadow economy. Public Choice, 146(3), 269-289. doi:10.1007/s11127-009-9590-0
  • Williams, C.C. and Schneider, F. (2013). The shadow economy. London: Institute of Economic Affairs.
  • Yerdelen Tatoğlu, F. (2020). Panel zaman serileri analizi Stata uygulamalı (3.bs.) İstanbul: Beta Yayıncılık.
There are 34 citations in total.

Details

Primary Language Turkish
Subjects Economics
Journal Section Makaleler
Authors

Gürçem Özaytürk 0000-0001-5321-9784

Publication Date September 30, 2022
Acceptance Date September 28, 2022
Published in Issue Year 2022 Volume: 7 Issue: 3

Cite

APA Özaytürk, G. (2022). Kayıt Dışı Ekonomi Finansal Sektörün Gelişimini Kısıtlıyor mu?. Ekonomi Politika Ve Finans Araştırmaları Dergisi, 7(3), 713-725. https://doi.org/10.30784/epfad.1132075