UPM Institutional Repository

Shadow economy and financial sector development in Malaysia


Citation

Habibullah, Muzafar Shah and Din, Badariah and Saari, Mohd Yusof and Abdul Hamid, Baharom (2016) Shadow economy and financial sector development in Malaysia. International Journal of Economics and Financial Issues, 6 (spec. 7). pp. 181-185. ISSN 2146-4138

Abstract

This paper explores the link between the shadow economy and financial sector development in Malaysia for the period 1971-2013. We calculate the size of the shadow economy by using the modified-cash-deposits-ratio (MCDR) approach recently developed by Pickhardt and Sardia (2011). We investigate the contention made by Blackburn et al. (2012) that financial sector development can mitigate shadow economy – higher level of financial sector development lead to lower level of shadow economy. Our results show that there is a non-linear long-run relationship between shadow economy and financial sector development in Malaysia, an inverted-U shape curve, suggesting that at lower (higher) level of financial sector development commensurate with higher (lower) level of the shadow economy. One policy implication from this study is that the financial sector can play an important role in reducing shadow economy by improving the accessibility to financing and to the credit market.


Download File

[img]
Preview
PDF
Shadow economy and financial sector development in Malaysia.pdf

Download (71kB) | Preview

Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
Institute of Agricultural and Food Policy Studies
Publisher: EconJournals
Keywords: Modified-cash-deposit-ratio; Shadow economy; Financial sector development; Malaysia
Depositing User: Nurul Ainie Mokhtar
Date Deposited: 06 Feb 2018 02:25
Last Modified: 06 Feb 2018 02:25
URI: http://psasir.upm.edu.my/id/eprint/53808
Statistic Details: View Download Statistic

Actions (login required)

View Item View Item