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Informality and Bank Stability

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  • Gareth Lui-Evans
  • Shalini Mitra

Abstract

While financial development (FD) has been widely studied in the literature as a determinant of informal sector size, there has been no focus on the role of financial stability. We find that the stability of the banking sector has a significant and robust negative effect on informality across countries. Using a recently available testing methodology based on a heteroskedasticityrobust lasso we also find strong support for Rule of Law as a key determinant of informal sector size, and some evidence for the effect of FD

Suggested Citation

  • Gareth Lui-Evans & Shalini Mitra, 2019. "Informality and Bank Stability," Working Papers 201903, University of Liverpool, Department of Economics.
    • Handle: RePEc:liv:livedp:201903
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    File URL: https://www.liverpool.ac.uk/media/livacuk/schoolofmanagement/research/economics/Valuation,Risk,Revalued.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Selçuk Akçay & Emre Karabulutoğlu, 2021. "Do remittances moderate financial development–informality nexus in North Africa?," African Development Review, African Development Bank, vol. 33(1), pages 166-179, March.
    3. Gareth Liu-Evans & Shalini Mitra, 2023. "Formal sector enforcement and welfare," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(3), pages 706-728, June.
    4. Paraskevi Koufopoulou & Colin C. Williams & Athanassios Vozikis & Kyriakos Souliotis & Antonios Samprakos, 2021. "Estimating Shadow Economy Size in Greece 2000 - 2018: A Flexible MIMIC Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 71(3-4), pages 23-47, July-Dece.

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    Keywords

    Informality; bank stability; financial development; rigorous Lasso; rule of law;
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