Shadow Economy and its Impact upon Financial Security of National Economy Summary
DOI:
https://doi.org/10.33119/SIP.2018.165.6Keywords:
underground economy, insolvency risk, public debt, financial securityAbstract
The paper analyses the relationship between the size of shadow economy and national security. Countries where shadow economy plays a significant role can see it in low tax revenue. This reduces the government liability for taxes, increases public debt and the probability of its restructuring in the future. Our goal was to identify the link between public indebtedness, insolvency risk and the size of shadow economy as determinants of financial security of a country. The study focuses on the impact of shadow economy upon financial security of national economies. It was conducted on the group of 50 countries different when it comes to the size of their economies and shadow economy. The time-frame for the study was 5 years. Results of empirical study, in which we used regression, show significant impact of the size of shadow economy upon government’s insolvency risk, financial tensions in the system and the cost of debt servicing.
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References
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