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Shadow economy implications of financial development in Africa: Do income groups also matter?

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  • Ridwan, Lanre Ibrahim
  • Ajide, Kazeem Bello
  • Cifuentes-Faura, Javier
  • Al-Faryan, Mamdouh Abdulaziz Saleh

Abstract

This study explores the link between financial development and the shadow economy in 45 African economies from 1991 to 2019. While overall financial indices show no clear impact on the shadow economy across the entire sample, a nuanced pattern emerges when considering income groups. In low-income countries, financial institutions' index significantly amplify the shadow economy, whereas in lower middle-income nations, broader financial market measures independently contribute to its expansion. This reveals a heterogeneous relationship between financial development and the shadow economy in Africa, emphasizing the income-specific dynamics influencing these interactions.

Suggested Citation

  • Ridwan, Lanre Ibrahim & Ajide, Kazeem Bello & Cifuentes-Faura, Javier & Al-Faryan, Mamdouh Abdulaziz Saleh, 2024. "Shadow economy implications of financial development in Africa: Do income groups also matter?," Emerging Markets Review, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:ememar:v:59:y:2024:i:c:s1566014124000025
    DOI: 10.1016/j.ememar.2024.101107
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    More about this item

    Keywords

    Financial development; Shadow economy; Income groups; Financial markets; Africa;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania

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