The Shadow Economy and Its Determinants

The shadow economy includes economic activities that are not recognized and unregulated by public authorities. These activities cause significant challenges for policymakers by reducing tax revenue and weakening regulatory frameworks. Understanding the factors that influence the shadow economy is crucial for developing effective policies to mitigate its adverse effects. This study aims to compile, explore, and analyze previous studies on the shadow economy and identify its determinants. This study uses the PRISMA methodology (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) to conduct a systematic literature review on the shadow economy. 25 articles that fit these objectives were selected and analyzed. The study results indicate that eight determinants affect the shadow economy: corruption, Institutional Quality, Economic Development, Taxes, Government, Financial Development, Globalization, and Industrial Development. To tackle the shadow economy, a comprehensive approach that includes institutional improvements, fair tax policies, enhanced transparency, strong law enforcement, and inclusive economic development is necessary. Further research and in-depth analysis of these factors can help develop more effective strategies to reduce the shadow economy's adverse impacts.

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The International Liquidity Concept and Developing Economies’ Foreign Exchange Markets

The concept is introduced and its importance for macroeconomic analysis in developing and emerging economies is highlighted. International liquidity is defined as the sum of: i) Central bank’s gross international reserves, ii) Resident banks’ international liquid assets, iii) International currency notes held by resident agents. The paper discusses the unique characteristics of foreign exchange markets in developing and emerging economies, emphasizing their local nature. It is argued that the exchange rate in these economies is determined by the country’s international liquidity market.

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The Components of the International Property Rights Index that Matter for Economic Growth

The International Property Rights Index (IPRI) is considered a credible source of information for the public and policymakers, focusing on its components’ impact on economic growth. The study analysed the GDP per capita of 13 EU countries over 13 years (2009–2021) to assess the significance of IPRI components on economic growth. The research utilized correlation and regression analyses, particularly the Hausman-Taylor method, to evaluate the relationship between IPRI components and economic growth. The study found a positive correlation between IPRI and GDP per capita, highlighting the crucial role of IPRI components in driving economic growth.

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How Share Prices Fluctuate

The stationarity of the stock market’s value (q) and the mean reversion of its real return are its most obvious and exceptional characteristics. • These characteristics allow the cost of capital to be calculated, and the results are incompatible with the consensus growth model. The Stock Market Model (SMM) includes these features. It is testable and robust when tested; it is therefore the model used in this paper. The ex-post identity of investment and savings requires an ex post identity of the flow of savings available to finance the equity and debt proportions of new investment. This identity pulls q to fair value. Only temporary fluctuations in q around fair value are possible because net issues of equity will either depress net worth, relative to share prices, if q is above fair value, or boost it, if it is below. Changes in nominal corporate bond yields, profit margins and household liquidity cause fluctuations in q. Sustained misevaluations of the stock market require continuing changes in at least one of these three variables. Changes in these variables, which depend partly on endogenous political decisions, cannot be predicted, but past changes in q can be explained by their past fluctuations. The current prolonged excessive level of q has been driven by a rise in household liquidity, in response to the current secular liquidity trap. A similar experience in the 1930s ended in 1937 with the second worst recession in US history. Changes in corporate bond yields explain 7 of the past 10 major bull and bear phases of the stock market. One of these three exceptions is the current bull market, which depends on the rise in household liquidity.

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Predicting Probability of Soft-Landing, Stagflation and Monetary Policy Pivots

The study introduces a new framework to predict the probability of stagflation, soft-landing, and recession. It identifies 13 episodes each of stagflation and soft-landings in the U.S. economy post-1950, and notes 11 recessions as suggested by the NBER. An ordered probit framework is used to generate one-year-out probabilities for stagflation, recession, and soft-landing, with accurate predictions in the post-1980 period. A new method identifies 26 episodes of monetary policy pivots post-1990, and a probit model predicts the six-month-out probability of such pivots. The study presents a framework to predict the fed funds rate up to four FOMC meetings out, comparing its accuracy with FOMC and Blue-Chip forecasts.

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The Impact of Brexit on International Trade and Investment

The study examines the historical economic trends of Great Britain, particularly the impact of the two world wars and the changes in trade dynamics before and after joining the European Economic Partnership. Following the Brexit referendum (2016–2019), trade between the UK and the EU increased from £570 billion to £678 billion. The Agreement on Trade and Cooperation led to new trade barriers but also increased exports of certain goods by 10-30%. There has been a notable shift from goods to services in exports to EU countries like France, Germany, and the Netherlands. In 2023, service exports grew significantly, while goods exports saw minimal growth or decline. The investment market experienced a significant drop in capital investments from 2017-2020, followed by a recovery. Business investment growth returned to pre-Brexit levels by 2022-2023, despite initial damage to investment confidence.

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Global Examination of Corporate Taxation and Economic Activity

In virtually every country of the world, taxation is a major issue. Taxes of course are essential for governments to operate. Yet, if excessive, taxation can be onerous for taxpayers to accumulate the funds for payment. This study provides a full-scale global examination of the relationship of corporate income tax and economic activity, as measured by GDP per capita. In addition, the study examines the relationship of corporate income tax to public debt as a percentage of GDP. Findings indicate that lower corporate income tax rates are associated with significantly higher real GDP growth. In addition, lower corporate income tax rates are associated with lower, but not significantly lower public debt as a percentage of GDP.

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Formal-Informal Dichotomy of Work in India

This study tries to comprehend the facets of the increasing informalisation of work in India. It uses a deductive approach to analyse the secondary data and literature on the subject. Informalisation of the workforce is not a unique phenomenon restricted to India. Reforms have expedited the informalisation of work in India, which has a detrimental impact on the nature of newly created jobs. The empirical evidence from the National Sample Survey (2017–2018), Annual Survey of Industries (2016–2017 and 2021–2022), India Human Development Survey rounds (2003–2004 and 2011–2012), and International Labour Organisation (2018) showcases increasing informalisation of work. This has made the situation for workers and working conditions highly precarious with the changing nature of employment.

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Wealth Extraction and the Evolution of a Rentier Economy

The paper highlights the importance of a fair distribution of wealth among the economic agents of a country so that the benefits of a free-market economy work efficiently and create new wealth that fosters economic welfare are at work and functioning efficiently. Extreme inequality and a dysfunctional banking system deprives the market economy from entrepreneurial skills and innovation. In addition, the risk aversion attitudes of the wealthy lead to an elusive pursuit of return without the risk, but which inevitably, through a dysfunctional banking system, results in the transfer of existing wealth from the many to the very few rather than creating new wealth. The real economy is thereby trapped in a vicious circle which further exaggerates wealth concentration and inequality.

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A Panel Analysis of Inequality and Driving Factors of Economic Growth Across Economies

The paper examines the relationship between income inequality and economic growth, using various factors like the Gini index, initial per capita GDP, trade and financial openness, financial deepening, population growth, skill premium, energy use, price level ratio, and adult female mortality from 1990 to 2020. Statistical techniques such as ordinary least squares, fixed effects, and random effects regression were used to estimate these relationships. There is a positive relationship between income inequality and economic growth, indicating that higher levels of inequality tend to boost economic growth. Population growth and adult female mortality are consistently and negatively associated with economic growth.

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The Debt-Openness Puzzle

The ‘debt-openness puzzle’ is investigated in this research by determining the effect of trade liberalisation on rising debt levels and if BRICS nations trade openness and government debt have a different connection than advanced economies. Using panel generalised method of moments (PGMM) regressions, we investigate the causes of debt in the advanced, developing, and BRICS economies. The study provides a robustness check using the pooled mean group (PMG) / panel autoregressive distributive lag (ARDL) approach. The research uncovered three primary results. Firstly, in developed economies, there is an initial positive correlation between openness to trade and debt in the short term, but in the long run, this relationship becomes negative, suggesting a nonlinear connection. Secondly, in the short and long term, the BRICS exhibit a notable trend where trade openness and debt positively correlate. Lastly, panel Granger causality studies indicate a one-way relationship between trade openness and debt. The study infers that countries should approach trade openness cautiously, implement appropriate policies and measures to protect indigenous firms and local jobs, and maintain fiscal health without incurring excessive debt. Such policies should enhance productivity and competitiveness and support innovation to promote long-term sustainable economic growth.

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The Determinants to Finance the Fiscal Deficit

Bolivia faces a shortage of foreign currency, especially dollars, due to a decline in natural gas exports. This decline leads to reduced foreign exchange income and savings, impacting the productive community’s social economic model and causing macroeconomic imbalance. The research identifies independent variables affected by this shortage, all denominated in dollars: gas exports, international reserves, external debt, trade balance, foreign remittances, and the pension portfolio. These variables are essential for meeting obligations and expenses in the General State Budget, with the fiscal deficit being the dependent variable. The study covers the period from 2006 to 2023, during which the economic model was applied. Polynomial projections of each variable were made to identify cyclical patterns or trends. Multiple regression analysis showed a multiple correlation coefficient of 97%. The trade balance and the pension portfolio had negative and significant coefficients, while the other variables had positive and significant coefficients, except for gas exports.

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Do we Need a Fiscal Crisis in the G7?

Sovereigns borrow money like other economic actors – and sometimes they borrow too much. Given the critical role of sovereigns in their national economies, this means the effective management of government debt is crucial. Over the past 20 years, sovereign debt has often increased in response to shocks like the Global Financial Crisis, euro crisis, Brexit and the COVID-19 pandemic. Typically, only sovereigns have the capacity to support economies in times of crisis; but doing so repeatedly can raise fiscal challenges. These challenges are prevalent among G7 members, where only Germany has reduced debt in the past decade. Because reducing debt is not a vote winner, it may take a major fiscal crisis to build popular and political support for debt reduction in the years ahead.

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The Development of Central Bank Digital Currencies (CBDCs) at the Global Level

Central bank digital currencies (CBDCs) have rapidly emerged as a complement to physical cash. Motivations include maintaining central bank money as a monetary system anchor, addressing digital payment reliance, and promoting financial inclusion. CBDCs aim to improve digital payment arrangements. While only three countries have formally launched CBDCs, 35 others have initiated pilot projects. These pilot projects are expected to lead to formal CBDC launches within the next two to three years. The BIS and IMF actively monitor these developments and provide technical assistance to interested central banks. CBDCs represent a delicate balance between innovation and stability in the evolving financial landscape. Their successful implementation requires careful consideration of economic, technological, and regulatory factors.

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Trade Reforms and Smooth Labour Market Adjustments in India?

There is a growing concern among economists that the trade policy reforms resulting from India’s growing participation in various multilateral and bilateral agreements has not benefitted all workers engaged in the manufacturing sector. As per existing literature, reform-led reallocation of workers from contracting to expanding sectors will be relatively less costly, if intra-industry trade prevails. Empirical data indicate a mismatch in the number of workers leaving and joining major trade deficit and surplus sectors, which are involved in intra-industry trade. However, due to lack of data availability, no information could be obtained about the ‘origin’ sectors from which the workers are reallocating themselves. This renders the computation of the exact loss (i.e., adjustment costs of trade) difficult. It is also difficult to draw similar insight on entry pattern of new entrants to the industrial workforce, particularly after launch of the ‘Make-in-India’ Scheme (2014) and ‘Skill India Mission’ (2015).

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Institutional Capital in EU Candidate Countries

In economic theory, a growing understanding of the crucial connection between institutional capital and economic development. Modern economists stress that institutional capital is key to shaping an economic progress, influencing the policies of organisations like the World Bank and IMF, as North (1994) points out. This is especially important for developing countries. Efficient institutional capital plays a crucial role in the aspirations of candidate countries waiting European Union (EU) membership. These countries must cultivate strong institutions as the foundation of their path toward EU integration, given the strict criteria and expectations set forth by the EU. To conduct a comprehensive and complex analysis of a country’s institutional capital, there are used two separate indexes: the Rule of Law Index and the Economic Freedom Index. These indexes provide clear but complementary insights into various aspects of a nation’s institutional efficiency.

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Legal Determinants That Impact Economic Growth

Economic growth, as a leading macroeconomic objective, is supposed to be determined by different types of variables and indicators, including legal ones. Therefore, through panel data analysis of the 20 EU countries for 2013-2021 years, this research article came across legal determinants that impact economic growth. Data covered in the examination were from secondary sources, i.e., from two credible international institutions, the World Justice Project and the World Bank. This study, conducted through a quantitative scientific approach, i.e., the robust fixed effects model of regression analysis, found the following six legal determinants that impact economic growth: 1) Effectiveness of keeping crime under control; 2) Effectiveness of enforcement of civil justice; 3) People do not use violence to redress personal grievances; 4) Laws and government data are publicised properly (transparency); 5) Government officials in the judicial branch do not utilise their office for personal gain. 6) Civil justice is accessed and afforded by people. The robust fixed effects model was not a subjective choice, but a decision made through the respective tests of pooled OLS, random effects and fixed effects.

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The Effect of Islamic Finance on the Economic Growth of a Sample of Islamic Countries during the Period 2001–2019

This study examines the impact of Islamic finance on the economic growth of early adopters of Islamic banking: in Malaysia, Indonesia, Bahrain, Saudi Arabia, and the UAE, using data from 2001 to 2019. Unit root tests determine the stability and integration order of Islamic finance. The study finds that Islamic banks significantly contribute to economic performance, promoting Islamic economic activities and fostering economic growth. This highlights the significance of Islamic finance in driving economic development, especially in nations with Islamic banking. The research offers valuable empirical evidence to the literature on Islamic finance and its role in economic growth in these countries. Overall, it emphasises the positive practical implications of Islamic finance in enhancing economic growth and development.

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Assessing Economic Data Integrity Amidst Sovereign Default

The sovereign default of Sri Lanka in April 2022 has sparked concerns about the accuracy and reliability of official economic data, including GDP, inflation, and unemployment figures. The integration of statistical agencies under government ministries in developing countries like Sri Lanka raises concerns about political influence and data integrity. The inflation data in Sri Lanka, measured by indices such as Colombo Consumer Price Index (CCPI) has been historically low until 1977 but has since risen to double-digit levels, reaching 46% in 2022. However, authors raise doubts about the accuracy of these figures due to factors such as subsidised goods distorting consumer price indices and manipulated exchange rates affecting import costs. Unemployment data in Sri Lanka face challenges due to disguised unemployment and weak measurement methods. Discrepancies between official labour force surveys and data from institutions like the Employees’ Provident Fund indicate a need for more accurate and comprehensive data collection methods to understand the true extent of unemployment in the country. These discrepancies could affect policy decisions, especially regarding monetary policy and economic growth strategies.

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