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Catching the mirage: The shadow impact of financial crises

Hany Abdel-Latif, Bazoumana Ouattara, Phil Murphy, Hany Mohamed

The Quarterly Review of Economics and Finance

Swansea University Author: Hany Mohamed

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DOI (Published version): 10.1016/j.qref.2017.01.012

Abstract

This paper examines the dynamics of the shadow economy in times of financial crises. First, we estimate the size of the shadow economy in nine developing countries using energy consumption as a proxy for total economic activity. We show that our proposed proxy performs better than the conventional p...

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Published in: The Quarterly Review of Economics and Finance
ISSN: 10629769
Published: 2017
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URI: https://cronfa.swan.ac.uk/Record/cronfa33011
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spelling 2017-09-11T11:23:36.0070972 v2 33011 2017-04-21 Catching the mirage: The shadow impact of financial crises 2930976ccf31ef0c71f78f7cb47e2d5d Hany Mohamed Hany Mohamed true false 2017-04-21 SOSS This paper examines the dynamics of the shadow economy in times of financial crises. First, we estimate the size of the shadow economy in nine developing countries using energy consumption as a proxy for total economic activity. We show that our proposed proxy performs better than the conventional proxy of electricity consumption. In addition, given that financial crises usually overlap; a fact that is overlooked by existing literature, we construct a zero-one index to measure the intensity of a given shock. To explain the shadow economy impact of financial crises, we employ a set of country-specific VAR models and exploit their impulse responses. To this end, the paper finds empirical evidence of the countercyclical behaviour of the shadow economy, which suggests its buffering role in time financial crises. We show that our results are not sensitive to the method used to measure the size of the shadow economy. Finally, we build on these results to draw some policy recommendations. Journal Article The Quarterly Review of Economics and Finance 10629769 Financial crisis; Shadow economy; Developing countries 31 12 2017 2017-12-31 10.1016/j.qref.2017.01.012 COLLEGE NANME Social Sciences School COLLEGE CODE SOSS Swansea University 2017-09-11T11:23:36.0070972 2017-04-21T06:13:05.6303015 Faculty of Humanities and Social Sciences School of Management - Economics Hany Abdel-Latif 1 Bazoumana Ouattara 2 Phil Murphy 3 Hany Mohamed 4 0033011-05062017161707.pdf Abdel-LatifMurphyOuattara2017Catching.pdf 2017-06-05T16:17:07.4170000 Output 2376481 application/pdf Accepted Manuscript true 2019-03-06T00:00:00.0000000 true eng
title Catching the mirage: The shadow impact of financial crises
spellingShingle Catching the mirage: The shadow impact of financial crises
Hany Mohamed
title_short Catching the mirage: The shadow impact of financial crises
title_full Catching the mirage: The shadow impact of financial crises
title_fullStr Catching the mirage: The shadow impact of financial crises
title_full_unstemmed Catching the mirage: The shadow impact of financial crises
title_sort Catching the mirage: The shadow impact of financial crises
author_id_str_mv 2930976ccf31ef0c71f78f7cb47e2d5d
author_id_fullname_str_mv 2930976ccf31ef0c71f78f7cb47e2d5d_***_Hany Mohamed
author Hany Mohamed
author2 Hany Abdel-Latif
Bazoumana Ouattara
Phil Murphy
Hany Mohamed
format Journal article
container_title The Quarterly Review of Economics and Finance
publishDate 2017
institution Swansea University
issn 10629769
doi_str_mv 10.1016/j.qref.2017.01.012
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Economics{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Economics
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description This paper examines the dynamics of the shadow economy in times of financial crises. First, we estimate the size of the shadow economy in nine developing countries using energy consumption as a proxy for total economic activity. We show that our proposed proxy performs better than the conventional proxy of electricity consumption. In addition, given that financial crises usually overlap; a fact that is overlooked by existing literature, we construct a zero-one index to measure the intensity of a given shock. To explain the shadow economy impact of financial crises, we employ a set of country-specific VAR models and exploit their impulse responses. To this end, the paper finds empirical evidence of the countercyclical behaviour of the shadow economy, which suggests its buffering role in time financial crises. We show that our results are not sensitive to the method used to measure the size of the shadow economy. Finally, we build on these results to draw some policy recommendations.
published_date 2017-12-31T13:10:18Z
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