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The role of financial development on the underground economy in regards to Europe’s 2020 strategy

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  • Imamoglu, Hatice

Abstract

This paper attempts to investigate the relationships between development in the financial sector and the size of the underground economy in European Union countries. Our aim is to investigate the role of financial sector development when it comes to the size of the underground economy, as well as how financial development aids in meeting the growth objectives of the ‘Europe 2020 Strategy’. Panel data analysis will be conducted for the period 2004–2017 in order to examine the effects of financial sector development on the size of the underground economy. The main findings of this paper suggest that financial development has a significantly reducing effect on the size of the underground economy. In conclusion, development within the financial sector significantly lessens underground economic activity in the European Union. With further development of the financial sector, underground economies will not be an obstacle for the fulfilment of the cohesion and growth objectives of the Europe 2020 strategy.

Suggested Citation

  • Imamoglu, Hatice, 2021. "The role of financial development on the underground economy in regards to Europe’s 2020 strategy," Economic Systems, Elsevier, vol. 45(2).
    • Handle: RePEc:eee:ecosys:v:45:y:2021:i:2:s0939362520300753
    DOI: 10.1016/j.ecosys.2020.100768
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    More about this item

    Keywords

    Financial sector development; Underground economy; European Union countries; Europe 2020 strategy;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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