Dynamic effects of shadow economy and environmental pollution on the energy stock prices: empirical evidence from OECD c
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RESEARCH ARTICLE
Dynamic effects of shadow economy and environmental pollution on the energy stock prices: empirical evidence from OECD countries Zehra Şenhaz 1 & Setareh Katircioglu 2 & Salih Katircioglu 1 Received: 16 June 2020 / Accepted: 11 October 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract This study investigates the dynamic effects of the shadow economy and environmental pollution on the energy stock prices in the case of the Organization for Economic Co-operation and Development (OECD) countries via generalized methods of moments (GMM) and during the years from 2004 to 2014. Results suggest significant links between the volume of shadow economies, energy stock prices, and environmental pollution. Negative effects of carbon dioxide emissions on energy stock prices are found in this study. Furthermore, a U-shaped relationship is also found between the shadow economy and energy stock prices; that is the initial levels of the shadow economy the response of energy stock prices is negative; then, beyond a trough point, its response starts to be positive at the further stages of the level of shadow economies. Despite energy consumption raises energy stock prices, environmental pollution mitigates the value of energy stock prices. Keywords Shadow economy . Environmental pollution . Energy stock price . Generalized methods of moments (GMM)
Introduction Those economic activities that are hidden from official agencies because of regulatory, institutional, and financial purposes are called “shadow economies.” Tax evasion, avoiding paying social security funds, and illegal economic activities that are not recorded by official institutions are basic examples of financial purposes. Shadow economy is expressed with several names and definitions such as the black economy, informal economy, hidden economy, and cash economy (see
Responsible editor: Eyup Dogan * Salih Katircioglu [email protected] Zehra Şenhaz [email protected] Setareh Katircioglu [email protected] 1
Department of Banking and Finance, Faculty of Business and Economics, Eastern Mediterranean University, P.O. Box 99628, Via Mersin 10, Famagusta, North Cyprus, Turkey
2
Department of Banking and Finance Faculty of Economics & Administrative Sciences, University of Kyrenia, P.O. Box: 9000, Karakum, Via Mersin 10, Kyrenia, Northern Cyprus, Turkey
Medina and Schneider 2018; Markandya et al. 2013). The size of the shadow economy was investigated by scholars over the years (Hassan and Schineder 2016; Williams 2011). The strict government policies and high taxes are the results of growing informal economies. The high tax burdens mitigate the incentive to accomplish tax obligations and constitute a budget deficit. Consequently, misspecification of economic indicators such as gross domestic product (GDP) arises due to the volume of the shadow economy (Schneider 1986). The informal activities have important roles in the financial system of economies (Fethi et al. 2006; Williams 2011). Firms should show up th
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