Financial market inclusion, shadow economy and economic growth: New evidence from emerging economies

This study is the first to examine the impact of the shadow economy on financial market inclusion simultaneously examining the short run and the long run. Using annual data from 1980 to 2013 for 18 selected merging economies we find that the shadow economy has significant short-run asymmetric effects on the financial market inclusion of a majority of emerging economies in our sample. We use the recent nonlinear cointegration approach (i.e., NARDL), which introduces nonlinearity into the model specification, to search for asymmetric effects of the shadow economy on financial market inclusion.