Empirical studies that rely on a linear framework typically fail to find evidence of a causal link between financial integration and economic growth. In this study, we extend the analysis by applying both linear and nonlinear Granger-causality tests to data for 19 emerging and developing countries. Consistent with previous research, the linear causality analysis reveals only weak causal linkages between financial integration and economic growth. In contrast, the nonlinear causality analysis provides evidence of significant nonlinear causality in 18 out of 19 countries. The growth hypothesis holds true for Argentina, Bolivia, Colombia, Morocco, Tunisia, and Venezuela whereas a reverse relation was found in Brazil, Chile,

The main objective of this study is to examine the long‐run relationship between export upgrading and economic growth for 67 countries over the period of 1984–2013. For this purpose, a panel cointegration framework that allows to control for parameters heterogeneity, cross‐sectional dependence and non‐stationarity has been deployed. Empirical results yield evidence of a positive and significant effect of export upgrading on economic growth for the full‐sample and high‐income panels, while this effect is negative and significant for low‐income countries and insignificant for middle‐income countries. Particularly, our findings show evidence of an inverted U‐shaped relationship for the global and high‐income panels. However, for low‐income countries relationship between export complexity and economic growth was found to be U‐shaped. These results are robust to several robustness checks and have important policy implications. In developed countries, excessive export complexity may be job‐destructive, and thereby threatens long‐run growth and prosperity. For non‐developed countries, exports' diversification should be prioritized during the first stages of development. Industrial upgrading should not be considered as a strategic economic policy before the economy reaches a minimum level of maturity.

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The aim of this paper is to empirically investigate the dynamic linkages between unemployment and shadow economy for 32 developing and developed countries for the period 1980 -2009 using parametric and non-parametric techniques. To this end, the Hansen and Seo (2002) threshold cointegration approach and the nonlinear causality test of Kyrtsou and Labys (2006) are applied to assess these relationships. Results obtained clearly do not support the view that unemployment and shadow economy are neutral with respect to each other, except in the case of Bolivia, China, Colombia, Pakistan, Philippines and Portugal, where a neutral relationship is found. We find, however, considerable evidence of bi-directionality in Finland and Sweden. This indicates that high levels of unemployment lead to high levels of shadow economy and vice versa. We also find clear evidence of unidirectional causality running from unemployment to shadow economy in the US, Jamaica and Venezuela which implies that, in these three countries, a faster rate of unemployment promotes a higher share of the underground economy in total GDP. Further, the causality relationship appears to be uni-directional but reversed for Chile. Overall, our findings suggest that policy implications of the unemployment-shadow economy relationships should be interpreted with caution, taking into account the test-dependent and country-specific results.

Most previous studies that examined the relationship between the size of shadow economy and the pillars of sustainable development maintained that this relationship is linear. This paper provides an empirical contribution to the literature by arguing that this relationship is likely to be nonlinear, and it might be subject to threshold effects. For this purpose, in addition to the static threshold panel model of Hansen (1999. “Threshold Effects in Non-dynamic Panels: Estimation, Testing, and Inference.” Journal of Econometrics 93 (2): 345–68), the dynamic panel threshold model suggested by Seo and Shin (2016. “Dynamic Panels with Threshold Effect and Endogeneity.” Journal of Econometrics 195 (2): 169–86) has been applied to a larger panel-data set covering 83 developed and developing countries over the 1996–2017 period. Empirical results from both models yield evidence advocating the existence of threshold effects of the shadow economy on the economic, social, and environmental dimensions of sustainable development for the global sample as well as the sub-samples of developed and developing countries. Moreover, for the global sample and developing countries, our findings show that shadow economy would spoil the three sustainable development pillars only when its size exceeds a certain threshold critical size. While, the impact for developed countries was found negative even for low levels of underground activities. These finding are shown to be robust to alternative proxies for the size of the shadow economy and have important policy implications, especially for developing countries. In these countries, a moderate size of the shadow economy might have positive spillovers on long-term growth and sustainable development. Our research also suggests that, for developing and developed countries to achieve sustainable goal 8.3, the extent of the shadow activities should be taken into account.

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