scholarly journals SOME NEW ESTIMATES OF SHADOW ECONOMY FOR 80 COUNTRIES USING POOLED MEAN GROUP ESTIMATOR

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Yan-Ling Tan ◽  
Muzafar Shah Habibullah ◽  
Shivee Ranjanee Kaliappan ◽  
Alias Radam
Keyword(s):  
Shadow Economy ◽  
Factor Model ◽  
Statistical Significance ◽  
Dynamic Factor ◽  
Pooled Mean Group ◽  
Macroeconomic Uncertainty ◽  
Long Run ◽  
Uncertainty Index ◽  
Short Run ◽  
Currency Demand

The purpose of this study is to estimates the size of the shadow economy for 80 countries from nine regions spanning the period 1975-2012 based on Tanzi-type currency demand approach (CDA). This study contributes to the literature in three distinct ways. First, we augment CDA regression with a macroeconomic uncertainty index (MUI). Second, the construction of the uncertainty index is based on the dynamic factor model (DFM). Third, the pooled mean group (PMG) estimator allows in capturing the heterogeneity across countries in the short-run dynamics but imposing restrictions in the long-run parameters. The results confirm the existence of the longrun equilibrium relationship among the variables examined. All coefficients show expected signs along with statistical significance. More importantly, the macroeconomic uncertainty index variable show positive relationship, suggesting that public tend to hold more currency in an uncertain macroeconomic environment. In addition, we observe that developing regions (ranging from 19.9% to 37.3%) exhibit relatively large size of the shadow economy. On the contrary, developed regions have a considerable smaller estimate (ranging from 13.7% to 19.0%) of the size of shadow economy. On average, the world estimate of the shadow economy as a percentage of GDP is about 23.1%. Keywords: Shadow Economy; Currency Demand; Macroeconomic Uncertainty; Pooled Mean Group.

Financial uncertainty valuation: does Shariah compliant screening matter?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Fatma Alahouel ◽  
Nadia Loukil
Keyword(s):  
Factor Model ◽  
Dynamic Factor ◽  
Financial Assets ◽  
Content Type ◽  
Vector Autoregressive ◽  
Financial Uncertainty ◽  
Long Run ◽  
Uncertainty Index ◽  
Practical Implications ◽  
Uncertainty Level

Purpose This paper aims to investigate the financial uncertainty vary according to different financial assets type: conventional and Islamic. Design/methodology/approach Common factors are related to risk or known information. For this, the authors use general dynamic factor model to extract common variation between both types of indexes. Then they calculate stochastic volatility for each idiosyncratic component. They also carry out the study on three different family indexes respectively, Dow Jones, S&P and MSCI indexes, for the period going from January 1, 2008 to June 30, 2018. Through a comparison analysis with uncertainty index designed for conventional assets, the authors examine the similarity between the two indexes via mean, median and variance tests. They decrypt the interrelation between them by using OLS linear regression, vector autoregressive model. Findings The findings show that Islamic assets uncertainty is different from conventional uncertainty level. This difference can be due to the Shariah screening and the prohibition of gharar. The main findings suggest that Islamic financial uncertainty is lower than conventional one. The OLS results prove that conventional financial uncertainties have no impact on their Islamic counterparts. In addition, Islamic financial uncertainty appears to have no significant influence on conventional one exception for Dow Jones pair. Overall, the findings support the decoupling hypothesis in term of uncertainty only for SP and MSCI indexes. Practical implications Risk averse investors can find their claim in Shariah-compliant assets, as it offers a low level of financial uncertainty. A portfolio manager may benefit from the long run non-association in uncertainty between Islamic and conventional assets especially in time of crisis. Originality/value In this work, the authors measured financial uncertainty differently and take into account the specific features of each index type to improve the results quality.

Has the low level of economic growth spurred informal sector activities in Uganda? An empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stephen Esaku
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Shadow Economy ◽  
Time Series Data ◽  
Series Data ◽  
Content Type ◽  
Low Level ◽  
Revenue Collection ◽  
Long Run ◽  
Short Run

PurposeIn this paper, the authors examine how economic growth shapes the shadow economy in the long and short run.Design/methodology/approachUsing annual time series data from Uganda, drawn from various data sources, covering the period from 1991 to 2017, the authors apply the ARDL modeling approach to cointegration.FindingsThis paper finds that an increase in economic growth significantly reduces the size of the shadow economy, in both the long and short run, all else equal. However, the long-run relationship between the shadow economy and growth is non-linear. The results suggest that the rise of the shadow economy could partially be attributed to the slow and sluggish rate of economic growth.Practical implicationsThese findings imply that addressing informality requires addressing underlying factors of underdevelopment since improvements in economic growth also translate into a reduction in the size of the shadow economy in the short and long run.Originality/valueThese findings reveal that the low level of economic growth is an issue because it spurs informal sector activities in the short run. However, as the economy improves, it becomes an incentive for individuals to operate in the informal sector. Additionally, tackling shadow activities in the short run could help improve tax revenue collection.

scholarly journals Long-Run and Short-Run Effects of Trade Openness on Life Quality in Sub-Saharan Africa

2021 ◽  
Vol 11 (8) ◽  
pp. 72-83
Author(s):  
Guivis Zeufack Nkemgha ◽  
Aimée Viviane Mbita ◽  
Symphorin Engone Mve ◽  
Rodrigue Tchoffo
Keyword(s):  
Trade Openness ◽  
Life Quality ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
French Colonies ◽  
Sub Saharan ◽  
British Colonies

This paper contributes to the understanding of the other neglected effects of trade openness by analysing how it affects life quality in sub-Saharan African countries over the period 2000–2016. We used two trade openness indicators, namely: Squalli and Wilson index and the rate of trade. The empirical evidence is based on a pooled mean group approach. With two panels differentiated by their colonial origin, the following findings are established: the trade openness variable measured by Squalli and Wilson index has no effect on life quality in the both groups of countries in the short-run. However, it has a positive and significant effect on life quality in the both group of countries in the long-run. The use of the rate of trade confirms the results in the both groups of countries in the long-run. The contribution of trade openness to life quality is 3.27 and 5.19 times higher in the Former British Colonies than that recorded in the Former French Colonies of SSA respectively to the use of Squalli and Wilson index and the rate of trade. Overall, we find strong evidence supporting the view that trade openness promotes life quality in SSA countries in the long run.

Measuring the Output Gap using Large Datasets

2021 ◽  
pp. 1-45
Author(s):  
Matteo Barigozzi ◽  
Matteo Luciani
Keyword(s):  
Factor Model ◽  
Theoretical Models ◽  
Output Growth ◽  
Output Gap ◽  
Dynamic Factor ◽  
Dynamic Factor Model ◽  
Goods And Services ◽  
Long Run ◽  
Slow Drift ◽  
Macroeconomic Indicators

Abstract We propose a new measure of the output gap based on a dynamic factor model that is estimated on a large number of U.S. macroeconomic indicators and which incorporates relevant stylized facts about macroeconomic data (co-movements, non-stationarity, and the slow drift in long-run output growth over time). We find that, (1) from the mid-1990s to 2008, the U.S. economy operated above its potential; and, (2) in 2018:Q4, the labor market was tighter than the market for goods and services. Because it is mainly data-driven, our measure is a natural complementary tool to the theoretical models used at policy institutions.

Public debt, corruption and shadow economy in Africa: an empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Victor Owusu-Nantwi ◽  
Gloria Owusu-Nantwi
Keyword(s):  
Public Debt ◽  
Shadow Economy ◽  
African Countries ◽  
Correction Model ◽  
Content Type ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Policies And Programs

PurposeThe purpose of this paper is to examine the effect of corruption and shadow economy on public debt in 51 African countries. In addition, the study explores the causal linkage between corruption, shadow economy and public debt.Design/methodology/approachThe study employs vector error correction model and Kao cointegration test to examine the long-run relationship between corruption, shadow economy and public debt in Africa.FindingsThe study finds a positive and statistically significant relationship between corruption and public debt. Further, the study reports a positive and statistically significant effect of shadow economy on public debt. In the short run, the study finds a unidirectional causal relationship between corruption, shadow economy and public debt with the direction of causality running from corruption and shadow economy to public debt, respectively.Practical implicationsThis study recommends that countries should pursue policies and programs that would provide resources to agencies tasked with the responsibility of fighting corruption. This would ensure that countries have effective institutions that curb vulnerabilities to corruption and reduce the size of the shadow economy and public debt.Originality/valueThis study contributes to the literature by showing how corruption and shadow economy affects public debts of African countries. To the best of the author's knowledge, this is the first attempt to examine this relationship in the context of Africa.

Population Growth and Urbanization in Africa

2016 ◽  
pp. 282-297 ◽  
Author(s):  
Samuel Adams ◽  
Eric Evans Osei Opoku
Keyword(s):  
Carbon Dioxide ◽  
Population Growth ◽  
Carbon Dioxide Emissions ◽  
Age Groups ◽  
African Countries ◽  
Pooled Mean Group ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
Sub Saharan

This study examined the effect of population growth and urbanization on the environment (carbon dioxide emissions) for 37 sub Saharan African countries based on 1980-2010 annual data. Using the Pooled Mean Group estimation technique, the findings of the study show that affluence and industrialization have negative effect on the environment (increases carbon dioxide emissions) while urbanization does not have a significant effect on carbon dioxide emissions. The population variable is significant only in the long run but insignificant in the short run. Also, after controlling for the different age groups, the results show that the more active age group (15-59) is positive and significantly related to carbon dioxide emissions.

Does public investment crowd-out private investment in India

2017 ◽  
Vol 9 (1) ◽  
pp. 50-69 ◽  
Author(s):  
Shanmugam Muthu
Keyword(s):  
Public Investment ◽  
Private Investment ◽  
Infrastructure Investment ◽  
Public Infrastructure ◽  
Public And Private ◽  
Content Type ◽  
Macroeconomic Uncertainty ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the crowding-in or crowding-out relationship between public and private investment in India. Design/methodology/approach The autoregressive distributed lag (ARDL) bounds testing approach is used to estimate the long run relationship between public and private investment using annual data from 1971-1972 to 2009-2010. Findings Based on the empirical findings, it is observed that aggregate public investment has a positive effect on private investment both in the long run and the short run. In contrast to the findings of previous studies, no significant impact of public infrastructure investment on private investments is found in the long run, while non-infrastructure investment has a positive impact on private investment in the short run. Among the various categories of infrastructure sector, a positive and significant impact in the case of electricity, gas and water supply is observed. Similarly, the result indicates that public investment in machinery and equipment and construction have substantially influenced the private sector machinery and equipment in the long run and the short run. In the case of the role of macroeconomic uncertainty, the results find a negative and significant impact on private investment and the impact is higher in the short run than in the long run. Originality/value The present study extends the literature in three important ways: First, the study attempts to capture heterogeneity of public investment as well as disaggregate effects of two different categories of public infrastructure on private investment. The extent to which two different types of public assets impact the private investment in machinery and equipment investment is also examined. Second, ARDL model is used to examine the long-run relationship between public and private investment. Third, the study incorporates macroeconomic uncertainty into the empirical analysis to examine the role of macroeconomic volatility in determining private investment decision.

scholarly journals A Test of the validity of Crowding-out (or- in) hypothesis: A new examination of link between public borrowing and private investment in Emerging Europe

2021 ◽  
Vol 12 (1) ◽  
pp. 91-103
Author(s):  
Mehmed Ganic ◽  
Lejla Hodzic ◽  
Ognjen Ridic
Keyword(s):  
Public Debt ◽  
Private Investment ◽  
Transition Countries ◽  
Crowding Out ◽  
Debt Burden ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run

This study seeks to test the existence of the crowding-out (or- in) hypothesis in a sample of 17 Emerging Europe countries divided in two panels. The study employs a panel autoregressive distributed lag (ARDL) model based on three estimators, Mean Group Estimator (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effect (DFE), in order to evaluate the of stability of short run and long run coefficients using consistently compiled public borrowing and private investment data between 2000 and 2019. The empirical findings of the paper generally confirm the existence of a crowding out effect in both long run and short run in European post-transition countries, and in the long run for European transition countries. More specifically, elasticity of private investment with respect to public debt is greater in the European transition countries than in the European post-transition countries. However, the findings on the crowding out (in) effect of government spending and economic growth on private investment are mixed and conflicting in both the long run and the short run. Accordingly, the study recommends that selected countries should reassess their austerity agendas employed for lowering debt levels, and follow new strategies for managing public debt burden.

scholarly journals The Dynamic Impact of Public External Debt on Capital Formation in Sub-Saharan Africa: The Pooled Mean Group Approach

2021 ◽  
Vol 3 (4) ◽  
pp. 144-157
Author(s):  
Chukwunenye N Kocha ◽  
Marshal Iwedi ◽  
James Sarakiri
Keyword(s):  
External Debt ◽  
Capital Formation ◽  
Debt Service ◽  
Sub Saharan Africa ◽  
Interest Payment ◽  
Debt Sustainability ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan

The increasing reliance on public external debt stocks in Africa and other developing countries has raised the question of debt sustainability, especially in the face of Covid-19, which has forced many counties (both developed and developing) into an unforeseen and unplanned recession. This study contributes to the literature on debt sustainability by examining the effect of public debt on capital formation in Sub-Saharan Africa (SSA) from 2000 to 2008 using the pooled mean group estimation approach. The debt variables considered are external debt stock, debt service on external debt, and interest payment on external debt. Consistent with the overhang theory, our results show that increasing external debt stock and interest payment on external debts only have a marginal impact on capital formation in the short run and exerts a serious negative effect in the long run. Our results also show that debt service burden has a positive effect on gross fixed capital formation in the long run. Therefore, we argue that despite being faced with a huge debt service burden resulting from large external debt stock, SSA countries are not neglecting investments in critical infrastructures needed to drive economic growth. However, we recommend that increasing government revenue base, minimizing economic waste associated with public expenditure, and intensifying negotiations for debt relief may be a plausible way out.

scholarly journals Effects of Corruption and the Black Economy on Economic Growth in the CFA Franc Zone Countries

2021 ◽  
pp. 33-45
Author(s):  
Raphaël Erick Assoa Essono ◽  
Ibrahim Nji Ngouhouo
Keyword(s):  
Economic Growth ◽  
Negative Relationship ◽  
Underground Economy ◽  
Group Method ◽  
Franc Zone ◽  
Pooled Mean Group ◽  
Long Run ◽  
Short Run ◽  
Cfa Franc Zone ◽  
Cfa Franc

We conducted this study to empirically analyse the effects of corruption and the underground economy on economic growth in the case of the CFA franc zone countries over the period 2000-2016. To do so, we have carried out econometric estimations using panel data. Our empirical results obtained by the PMG (Pooled Mean Group) method confirm a negative relationship between economic growth and the underground economy in the short and long term. However, the long-run effect of corruption on economic growth is positive, while this effect becomes negative in the short run. The results could provide insight into different ways of fighting corruption and the shadow economy.

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