Abstract
Applying an advance dynamic panel second-generation two-step system generalized method of movement modeling, this study endeavors to bridge the gap in the literature by examining the association between shadow economy and economic stability in multiple countries with a special case of the Kingdom of Saudi Arabia. The study has been motivated by the evidence that the shadow economy is a persistent source of the decline in tax revenue, which is the main source of funds for any economy to run welfare packages for the public. In addition, it also impacts the economy’s financial stability and amplifies the losses. Saudi Arabia is selected as a special case given its global significance and participation in the group of the fastest growing economies in the world. Thus, this study finds a negative association between the shadow economy and economic stability in the case of the full sample and a sub sample of Saudi Arabia. In other words, our study supports the point of view of those scholars who claim that the shadow economy is harmful to the economy. Based on the empirical findings, the study recommends that policymakers need to give importance to the shadow economy while formulating economic stability policies in the case of a full sample, especially in Saudi Arabia. Similarly, the robustness of the results is tested using different model specifications and alternative estimation techniques.
Original language | English |
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Article number | 85 |
Journal | Mathematics |
Volume | 11 |
Issue number | 1 |
DOIs | |
State | Published - Jan 2023 |
Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2022 by the authors.
Keywords
- dynamic panel technique
- economic stability
- informal economy
- production efficiency
- Saudi Vision 2030
- shadow economy
ASJC Scopus subject areas
- Computer Science (miscellaneous)
- General Mathematics
- Engineering (miscellaneous)