Does informal economy impede economic growth? Evidence from an emerging economy. (3rd April 2021)

• Record Type: Journal Article
• Authors: Khuong, Nguyen Vinh; Shabbir, Malik Shahzad; Sial, Muhammad Safdar; Khanh, Thai Hong Thuy
• Is Part Of: Journal of sustainable finance & investment. Volume 11:Number 2(2021)
• Page Start: 103
• Page End: 122
• Publication Date: 2021-04-03
• Subjects: Informal economy -- economic growth -- ARDL -- Pakistan; Social responsibility of business -- Periodicals; Sustainable development -- Finance -- Periodicals; 332
• DOI: 10.1080/20430795.2020.1711501
• Languages: English
• ISSNs: 2043-0795

Abstract

ABSTRACT: The objective of this study is to re-examine the impact of the informal economy on economic growth in Pakistan. This study first computed the informal economy through currency demand equation and then the adopted auto-regressor distributed lags (ARDL) technique for data analysis. The result indicates that 56% informal economy of gross domestic product (GDP) exists in Pakistan. The Wald F -test shows that the overall model is statistically significant because the value of this test (13.4) is more than the upper and lower bounds values. Whereas Engle-Granger causality test describes that the growth rate of real GDP causes the Granger to GDP at 5%. This study tries to solve these issues and give a new policy implication for policymakers to control the informal economy and make sure that this sector will convert into a recorded or reported form.