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Shadow economy threshold effect in the relationship finance–growth in Tunisia: A nonlinear autoregressive distributed lag approach

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  • Khalil Mhadhbi
  • Chokri Terzi

Abstract

This paper tracks the financial growth in Tunisia over the period 1984–2016 with a special focus on the shadow economy. Using Tanzi's measures, we worked on a nonlinear autoregressive distributed lag (NARDL) model to test the impact of the informal economy. The results suggest that the long‐run effect of the financial growth becomes negative if there is a positive change in the shadow economy and the opposite holds. While changes in the shadow economy have no significant influence on the links between financial development and economic growth in the short run, they play a significant role in the Tunisian economy in the long run.

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  • Khalil Mhadhbi & Chokri Terzi, 2022. "Shadow economy threshold effect in the relationship finance–growth in Tunisia: A nonlinear autoregressive distributed lag approach," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 636-651, April.
    • Handle: RePEc:wly:jintdv:v:34:y:2022:i:3:p:636-651
    DOI: 10.1002/jid.3609
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