Shadow economy implications of financial development in Africa: Do income groups also matter?

Lanre Ibrahim Ridwan, Kazeem Bello Ajide, Javier Cifuentes-Faura and Mamdouh Abdulaziz Sa Al-Faryan

Emerging Markets Review, 2024, vol. 59, issue C

Abstract: This study explores the link between financial development and the shadow economy in 45 African economies from 1991 to 2019. While overall financial indices show no clear impact on the shadow economy across the entire sample, a nuanced pattern emerges when considering income groups. In low-income countries, financial institutions' index significantly amplify the shadow economy, whereas in lower middle-income nations, broader financial market measures independently contribute to its expansion. This reveals a heterogeneous relationship between financial development and the shadow economy in Africa, emphasizing the income-specific dynamics influencing these interactions.

Keywords: Financial development; Shadow economy; Income groups; Financial markets; Africa (search for similar items in EconPapers)
JEL-codes: C33 E44 G23 N37 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:59:y:2024:i:c:s1566014124000025

DOI: 10.1016/j.ememar.2024.101107

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