Financial Development and Shadow Economy in European Union Transition Economies

Yilmaz Bayar and Omer Faruk Ozturk
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Yilmaz Bayar: Usak University, Turkey
Omer Faruk Ozturk: Usak University, Turkey

Managing Global Transitions, 2016, vol. 14, issue 2 (Summer), 157-173

Abstract: The shadow economy has been a serious problem with varying dimensions in all the income group economies and has significant adverse effects on the development of economies. Therefore, all the countries have tried to combat with the shadow economy by taking various measures. This study researches the interaction among shadow economy, development of financial sector and institutional quality during 2003–2014 period in European Union transition economies employing panel data analysis. The empirical findings suggested a cointegrating relationship among shadow economy, financial sector development and institutional quality. Furthermore, financial development and institutional quality affected the shadow economy negatively in the long term.

Keywords: shadow economy; financial development; institutional quality; panel data analysis (search for similar items in EconPapers)
JEL-codes: C23 G20 H11 H26 O17 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (17)

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