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Corruption, Shadow Economy and Economic Growth - Evidence from Emerging and Developing Asian Economies

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  • Thi Anh Nhu Nguyen
  • Thi Thuy Huong Luong

Abstract

This paper investigates the interactions of corruption and the shadow economy with economic growth in 17 selected Asian countries with emerging and developing economies. These countries are categorized according to International Monetary Fund sources and chosen based on available data. This paper analyzes the annual data over the period 2000 – 2015 from the World Bank, Transparency International and from International Monetary Fund to estimate whether corruption and shadow economy affect economic growth. Generalized Methods of Moments (GMM) method is used in this research. The results show that corruption index has a statistically significant and positive impact on economic growth while the shadow economy has a significant negative impact. These findings suggest that corruption does not sand but "greases on the wheel" of economic growth. Further, a reduction in the size of shadow economy could be more beneficial for emerging markets and developing economies in Asia to develop economy. Additionally, the results also indicate that in these countries, foreign direct investment, public expenditure, tax revenue and inflation have a positive impact on the growth while remittances have no relationship.

Suggested Citation

  • Thi Anh Nhu Nguyen & Thi Thuy Huong Luong, 2020. "Corruption, Shadow Economy and Economic Growth - Evidence from Emerging and Developing Asian Economies," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(4), pages 85-94.
    • Handle: RePEc:mje:mjejnl:v:16:y:2020:i:4:85-94
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    2. Tetiana Kolomoiets & Nelli Tsybulnyk & Oleksandr Moroz & Vitaliy Prymachenko & Vadym Khashev, 2021. "Influence of shadow economy legalization on national security of Ukraine," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(3), pages 420-437, March.
    3. Stefan Petranov & Dimitar Zlatinov & Milen Velushev & Lillyana Georgieva & Radostina Ivcheva, 2022. "Shadow Economy and Production Factors: Results from an Empirical Analysis with a Panel Data Set," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 44-64.
    4. Hemachandra Padhan & Deepak Kumar Behera & Santosh Kumar Sahu & Umakant Dash, 2023. "Does Corruption Hinderance Economic Growth Despite Surge of Remittance and Capital Inflows Since Economic Liberalization in an Emerging Economy, India," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 426-449, March.
    5. Sultana, Nahid & Rahman, Mohammad Mafizur & Murad, S.M. Woahid, 2024. "Asymmetric role of the informal sector on economic growth: Empirical investigation on a developing country," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 96-107.
    6. Mara, Eugenia Ramona & Maran, Raluca, 2024. "Are fiscal rules efficient on public debt restraint in the presence of shadow economy?," Finance Research Letters, Elsevier, vol. 64(C).
    7. Thi Anh Nhu Nguyen & Thi Thuy Huong Luong, 2021. "Fiscal Policy, Institutional Quality, and Public Debt: Evidence from Transition Countries," Sustainability, MDPI, vol. 13(19), pages 1-15, September.

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