The Economic Growth–Inflation–Shadow Economy Trilogy: Developed Versus Developing Countries

Nedra Baklouti and Younes Boujelbene

International Economic Journal, 2019, vol. 33, issue 4, 679-695

Abstract: This study investigates the nexus among the economic growth–inflation–shadow economy trilogy by including the role of political stability for a sample of 33 developed and 14 developing countries over the 2005–2016 period. For the OECD countries, our results showed a bidirectional nexus among economic growth and the size of the shadow economy while the causality running from economic growth to inflation, on the one hand, and from inflation to the informal economy, on the other hand, is unidirectional. As for the MENA panel, the relationship between inflation and the underground economy remains bidirectional, while the relationship running from inflation to economic growth, on the one hand, and from the informal economy to economic growth, on the other hand, is unidirectional. With the introduction of political stability, the nexus among the informal economy and the inflation in the OECD countries becomes unidirectional running from inflation to the shadow economy. However, in the case of MENA countries, controlling for political stability reduces the magnitude of the coefficient of the shadow economy on inflation. We note that with a low level of political stability, countries facing the large size of the informal sector will shift their financing from taxes to seigniorage.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1080/10168737.2019.1641540 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:intecj:v:33:y:2019:i:4:p:679-695

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RIEJ20

DOI: 10.1080/10168737.2019.1641540

Access Statistics for this article

International Economic Journal is currently edited by Jaymin Lee Editor

More articles in International Economic Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().