Shadow economies at times of banking crises: Empirics and theory

Emilio Colombo, Luisanna Onnis, Patrizio Tirelli

Risultato della ricerca: Contributo in rivistaArticolo in rivistapeer review

20 Citazioni (Scopus)

Abstract

This paper investigates the response of the shadow economy to banking crises. Our empirical analysis, based on a large sample of countries, suggests that the informal sector is a powerful buffer, which expands at times of banking crises and absorbs a large proportion of the fall in official output. To rationalise our evidence, we build a dynamic stochastic general equilibrium model which accounts for financial and labour market frictions and for nominal rigidities. In line with the empirical literature on the shadow economy, we assume that in the informal sector access to external finance is limited, and the production technology is relatively more labour intensive. Following a banking shock in the official sector, the model predicts a large negative transmission to the unofficial economy that substantially dampens the overall effect of the shock.
Lingua originaleEnglish
pagine (da-a)180-190
Numero di pagine11
RivistaJOURNAL OF BANKING & FINANCE
Volume62
DOI
Stato di pubblicazionePubblicato - 2016

Keywords

  • DSGE models
  • Economics and Econometrics
  • Finance
  • Financial crises
  • Shadow economy

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