Digital finance, shadow economy, and economic growth: evidence from selected countries

Abstract

This study examines the impacts of digital finance and shadow economy on economic growth in 54 selected countries during the period from 2012 to 2021. Economic growth calculated as GDP per capita is a dependent variable; digital finance calculated as mobile money transaction and shadow economy are independent variables; corruption, trade freedom and foreign direct investment (FDI) are control variables. By using GMM estimator, our research found that while digital finance could exert a positive impact on economic growth, shadow economy negatively influences economic development. Moreover, it is discovered that foreign direct investment also has a positive effect on economic growth, and trade freedom as well as corruption is investigated to be statistically insignificant. These findings are expected to make an outstanding contribution to the development of digital finance in various nations including Vietnam, and recommend several useful policy implications in order to enhance digital finance and mitigate shadow economy that are of great benefits to economic progress.