Shadow Economy and Financial Sector Development in Malaysia
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 c...
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| Format: | Article |
| Language: | English |
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EconJournals
2016-10-01
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| Series: | International Journal of Economics and Financial Issues |
| Subjects: | |
| Online Access: | https://dergipark.org.tr/tr/pub/ijefi/issue/32000/353056?publisher=http-www-cag-edu-tr-ilhan-ozturk |
| _version_ | 1797915999286067200 |
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| author | Muzafar Shah Habibullah Badariah H. Din M. Yusof-Saari A. H. Baharom |
| author_facet | Muzafar Shah Habibullah Badariah H. Din M. Yusof-Saari A. H. Baharom |
| author_sort | Muzafar Shah Habibullah |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-04-10T12:50:15Z |
| format | Article |
| id | doaj.art-20c10f8e81f5439fbbe8ed6cd8dfb0f0 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T12:50:15Z |
| publishDate | 2016-10-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-20c10f8e81f5439fbbe8ed6cd8dfb0f02023-02-15T16:13:47ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382016-10-01671811851032Shadow Economy and Financial Sector Development in MalaysiaMuzafar Shah HabibullahBadariah H. DinM. Yusof-SaariA. H. BaharomThis 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.https://dergipark.org.tr/tr/pub/ijefi/issue/32000/353056?publisher=http-www-cag-edu-tr-ilhan-ozturkmodified-cash-deposit-ratio shadow economy financial sector development malaysia |
| spellingShingle | Muzafar Shah Habibullah Badariah H. Din M. Yusof-Saari A. H. Baharom Shadow Economy and Financial Sector Development in Malaysia International Journal of Economics and Financial Issues modified-cash-deposit-ratio shadow economy financial sector development malaysia |
| title | Shadow Economy and Financial Sector Development in Malaysia |
| title_full | Shadow Economy and Financial Sector Development in Malaysia |
| title_fullStr | Shadow Economy and Financial Sector Development in Malaysia |
| title_full_unstemmed | Shadow Economy and Financial Sector Development in Malaysia |
| title_short | Shadow Economy and Financial Sector Development in Malaysia |
| title_sort | shadow economy and financial sector development in malaysia |
| topic | modified-cash-deposit-ratio shadow economy financial sector development malaysia |
| url | https://dergipark.org.tr/tr/pub/ijefi/issue/32000/353056?publisher=http-www-cag-edu-tr-ilhan-ozturk |
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