Financial inclusion, the shadow economy and economic growth in developing economies

This study explores the impact of the financial inclusion and size of the shadow economy on the eco-nomic growth of developing economies over the period 2008-2017. The data for the endogenous, exoge-nous and control variables were collected from the World Development Indicators, the International Mon-etary Fund's (IMF) Financial Access Survey (FAS) and Medina and Schneider's global database (2019). The study applies a panel ordinary least square (OLS) fixed effect, a two-step difference generalised method of moments (GMM) and panel Granger causality approach. The results reveal that financial inclusion has a positive and statistically significant impact on economic growth; while in developing economies, the size of the shadow economy has a significant negative impact on economic growth. The findings remain robust to alternative econometric estimations. The asymmetric results in different countries provide prac-tical insights for governments, policymakers and regulators.(c) 2022 Elsevier B.V. All rights reserved.