Does financial development reduce the size of the informal economy in sub‐Saharan African countries?

Njangang, Henri; Nembot, Luc Ndeffo; Ngameni, Joseph Pasky

doi:10.1111/1467-8268.12446

Cited by 40 publications

(37 citation statements)

References 56 publications

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“…Also, Bayar & Ozturk, (2016) have found a negative effect of financial development on the shadow economy in the long term by using panel data in European Union transition economies during the period of 2003 to 2014. In the same line, Njangang et al (2018) have found that financial development causes to reduction in the shadow economy's volume in forty-one of the Sub Saharan African states from 1991 to 2015.…”

Section: The Links Between Shadow Economy and Financial Developmentmentioning

confidence: 86%

“…The study uses the most used indicators as a proxy for financial development in previous literature. Main indicators that are used in this study are; (1) Private credit by deposit money banks (Private Credit) to account for the ability to access financial resources introduced by banks (Berdiev & Saunoris, 2016;Gharleghi & Jahanshahi, 2020), (2) Bank concentration (BankConcentration) as a proxy to the efficiency of the financial system (Affandi & Malik, 2019;Ardizzi et al 2014;Bose et al 2012), and (3) domestic credit to private sector (DomesticCredit) as a proxy to availability and diversity of the financial system (Bayar & Ozturk, 2016;Bose et al, 2012;Njangang et al, 2018). To be able to link the shadow economy (Shadoweconomy) and economic growth (GDPGROWTH), the study used the GDP growth rate as a proxy of economic growth (GDPGROWTH).…”

Section: Methodsmentioning

confidence: 99%

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Shadow Economy, Economic Growth and Financial Development

Mar’i¹,

Çavuşoğlu²

2021

Preprint

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This study investigates the association between the economic growth, the shadow economy, and financial development in 156 countries worldwide for the period between 1991 and 2015. The study employs two-panel approaches, the panel vector Autoregression, and Panel Quantile Regression. The result shows that economic growth has a negative effect on the shadow economy, while the financial development variables have an asymmetric effect on the shadow economy. On the other hand, the results show that the shadow economy effects economic growth positively and financial development negatively. Also, Panel Quantile Regression shows that economic growth and financial development significantly affect the shadow economy at different quantiles. The effect of economic growth on the shadow economy found as negative at all tested quantiles, while financial development variables vary across the quantiles.JEL:C50, E00, O11, O17

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Section: The Links Between Shadow Economy and Financial Developmentmentioning

confidence: 86%

Section: Methodsmentioning

confidence: 99%

Shadow Economy, Economic Growth and Financial Development

Mar’i¹,

Çavuşoğlu²

2021

Preprint

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“…However, the remittances sent by the expatriates are used in five main categories being repayment of loans, the purchase of land, food and clothing, home construction and savings (International Organisation for Migration, 2014). Njangang, Noubissi & Nkengfack (2018) found a positive impact of remittance on the local economy of the recipient countries because it increases the size of their local economy. This finding is also supported from the study of Adams & Page (2005).…”

Section: Literature Reviewmentioning

confidence: 98%

Role of Remittances on Gross Domestic Product (GDP) Growth in Developing Countries: The Case of Bangladesh

Hossain¹,

Lee²,

Said³

et al. 2020

J. Rev. Global Econ.

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Bangladesh is one of the top ten remittance recipient countries and the contribution of remittance to the GDP has increased dramatically in recent years. This study examines the role of remittances on GDP growth in Bangladesh and Time series data for decades from 1996 to 2019 extracted from the World Bank database as well as Bangladesh Bank statistics were used. The study was conducted being motivated from conflicting results that have emerged in the literature on the impact of remittance on the economic growth of different countries. Using ordinary least squares (OLS) and Pearson correlation method, the empirical results of the study have been consistent with some previous studies while also contrasted to some literature on the impact of remittances on GDP, Gross Domestic Savings and Domestic Expenditure of a country. We have found that the remittances have a significant impact on the growth of GDP as well as Gross Domestic Savings and Domestic Expenditure. Since, there are no recent studies on the role of remittances on GDP, therefore, the findings of the study provide a significant insights for policymakers for strengthening policies and regulations relating to harnessing remittances for economic growth. Implications of the study have been discussed.

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“…The study by Liu‐Evans and Mitra (2019) finds that financial development and informal employment are negatively related. Finally, taking 41 sub‐Saharan countries as a case study and using an unbalanced panel data set over the period 1991–2015, and applying different econometric techniques, Njangang et al (2020) investigate the impact of financial development on the informal economy. They document a nonlinear relationship (U‐shaped) between financial development and the informal economy, suggesting that the informal economy first decreases until a certain threshold of financial development is reached and increases thereafter.…”

Section: Informal Economy Financial Development and Remittances: Thmentioning

confidence: 99%

Do remittances moderate financial development–informality nexus in North Africa?

Akçay

Karabulutoğlu

2021

African Development Review

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The prevalent informality and sheer size of international remittances characterize the North African countries. This study primarily aims at investigating how remittances moderate the effects of financial development on the informal economy in North African countries. Employing pool mean group (PMG)/panel ARDL approach and a balanced panel data set over the period 1980-2015, we find that remittances moderate the negative relationship between financial development and informal economy. This finding suggests that remittances bolster financial development, which, in turn, decreases the informal economy. Based on this result, we recommend that tailored policies and interventions are needed to promote financial development and international remittances in the North African region. 1 | INTRODUCTION Informality, or the informal economy, defined as "all economic activities by workers and economic units that are-in law or practice-not covered or insufficiently covered by formal arrangements" (OECD & ILO, 2019, p. 155), is a common issue that countries face all over the world, particularly developing countries. From the definition, it is clear that informality mainly manifests itself in production and employment. Indeed, according to Loayza (2016), over 70% of employment and 30% of production take place in the informal sector in a typical developing country. On a global scale, the informal economy accounts for 13% of world GDP, corresponding to US$10 trillion (Lewis, 2016). In terms of employment, two billion people, equivalent to about 62.1% of the working-age population, are informally employed in the world (ILO, 2018, p. 13). Finally, OECD and ILO (2019) estimates that 81% of all enterprises operate in the informal sector in the world. High levels of informal economy place an increasing strain on the formal economy and impede economic development and inclusive economic growth, particularly in developing countries. That said, the informal economy adversely affects a developing economy in several ways. First, it erodes the tax base and therefore undermines fiscal sustainability (

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Does financial development reduce the size of the informal economy in sub‐Saharan African countries?

Cited by 40 publications

References 56 publications

Shadow Economy, Economic Growth and Financial Development

Shadow Economy, Economic Growth and Financial Development

Role of Remittances on Gross Domestic Product (GDP) Growth in Developing Countries: The Case of Bangladesh

Do remittances moderate financial development–informality nexus in North Africa?

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