Macroeconomic fundamentals, institutional quality and shadow economy in OIC and non-OIC countries
ISSN: 0144-3585
Article publication date: 7 January 2022
Issue publication date: 18 October 2022
Abstract
Purpose
The purpose of this paper is to analyze the relationship between macroeconomic fundamentals, intuitional quality and shadow economy.
Design/methodology/approach
By utilizing data setspanning from 2004 to 2015 of 141 countries, the study has employed advanced panel technique, i.e. Generalized Method of Moments (GMM) method. In order to check consistency of the results, the study also used fixed effect and random effect for robustness.
Findings
The study finds that for the full sample, institutional quality has negative effect on shadow economy while macroeconomic fundaments effect shadow economy differently. After splitting the sample into Organization of Islamic Cooperation (OIC) and non-OIC countries subsamples, it observes same influence of macroeconomic fundaments and institutional quality on shadow economy, but the effect of macroeconomic fundaments and institutional quality on shadow economy is less observed for OIC countries. The results are found consistence by using different estimation methods.
Originality/value
The current literature has focused on estimating the size of shadow economy and literature linking the macroeconomic fundaments, institutional quality and shadow economy is scarce. Additionally, this study provides the evidence for cross comparison between OIC economies and non-OIC economies.
Keywords
Citation
Khan, S. and Rehman, M.Z. (2022), "Macroeconomic fundamentals, institutional quality and shadow economy in OIC and non-OIC countries", Journal of Economic Studies, Vol. 49 No. 8, pp. 1566-1584. https://doi.org/10.1108/JES-04-2021-0203
Publisher
:Emerald Publishing Limited
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