Economics at your fingertips  


Canh Nguyen (), Christophe Schinckus and Thanh Su
Additional contact information
Christophe Schinckus: #x2020;Taylor’s University, Malaysia

Global Economy Journal (GEJ), 2020, vol. 20, issue 03, 1-24

Abstract: The recent economic crisis re-emphasizes the importance of the economic fluctuations. This study investigates the role of shadow economy in combination with economic factors on the economic instability for 133 economies between 1991 and 2015. Using the system-GMM estimations, this paper shows that a larger shadow economy increases the fluctuations of GDP growth rate in relation to the size and the volatility of shadow economy. Notably, the shadow economy presents an inverted-U relationship with economic instability and this relationship is strongest for low- and lower-middle income economies. Our results identify two categories of drivers for economic fluctuations: the stabilizing factors (the labor force and the TFP) and the enhancing factors (capital investment, consumption, government spending, trade, and FDI inflows). Interestingly, exports increase economic fluctuations while imports decrease them. Finally, we discuss the differences in the determinants of economic instability across low, middle and high incomes countries. This study documented that shadow economy influences the economic fluctuations — our results actually confirm our hypothesis and the impact of shadow economy on the effectiveness of macroeconomic policies. The contribution of this paper is to show the extent to which the impact can affect the economic activities and how institutions can smooth this effect.

Keywords: Economic fluctuations; shadow economy; economic stability (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
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:

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2194565920500153

Access Statistics for this article

Global Economy Journal (GEJ) is currently edited by Joseph Pelzman

More articles in Global Economy Journal (GEJ) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().

Page updated 2022-01-15
Handle: RePEc:wsi:gejxxx:v:20:y:2020:i:03:n:s2194565920500153