|
on Informal and Underground Economics |
| By: | Francesco Pappadà; Yanos Zylberberg |
| Abstract: | We show that tax compliance is volatile and markedly responds to fiscal policy. To explore the consequence of this novel stylized fact, we build a model of sovereign debt with limited commitment and imperfect tax enforcement. Fiscal policy persistently affects the size of the informal economy, which impact future fiscal revenues and thus default risk. This mechanism captures a key empirical regularity of economies with imperfect tax enforcement: the low sensitivity of debt price to fiscal consolidations. The interaction of imperfect tax enforcement and limited commitment strongly constrains the dynamics of optimal fiscal policy. During default crises, high tax distortions force the government towards extreme fiscal policies, notably including costly austerity spells. |
| Keywords: | Sovereign Default, Imperfect Tax Enforcement, Fiscal Policy. |
| JEL: | E02 E32 E62 F41 H20 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:722&r=all |
| By: | Waknis, Parag |
| Abstract: | A surprise demonetization, where certain or all denominations of currency notes cease to be legal tender on a short notice, can be understood as a severe payment system shock requiring agents to immediately shift to alternative payment mechanisms. I use a short-term macroeconomic model based on Willamson (2009) featuring goods and financial market segmentation to analyze the effect of such a shock in an economy with substantial informality and cash dependence. The quantitative characterization of the equilibrium dynamics using a deterministic example shows significant level as well as redistributive effects in the very short run. The households with access to formal financial markets experience an increase in consumption and those without such access experience a decline. Most of these effects come from differential access to formal financial markets as a consumption smoothing mechanism. |
| Keywords: | demonetization, segmented markets, payments systems |
| JEL: | E26 E42 E52 |
| Date: | 2019–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:94171&r=all |
| By: | Vivian Malta; Lisa L Kolovich; Angelica Martinez; Marina Mendes Tavares |
| Abstract: | In sub-Saharan Africa women work relatively more in the informal sector than men. Many factors could explain this difference, including women’s lower education levels, legal barriers, social norms and demographic characteristics. Cross-country comparisons indicate strong associations between gender gaps and higher female informality. This paper uses microdata from Senegal to assess the probability of a worker being informal, and our main findings are: (i) in urban areas, being a woman increases this probability by 8.5 percent; (ii) education is usually more relevant for women; (iii) having kids reduces men’s probability of being informal but increases women’s. |
| Date: | 2019–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/112&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | This study investigates whether information sharing channels that are meant to reduce information asymmetry have led to an increase in financial access. The study employs a Generalised Method of Moments technique using data from 53 African countries during the period from 2004-2011 to examine this linkage. Information sharing channels are theoretically designed to promote the formal financial sector and discourage the informal financial sector. The study uses two information sharing channels: private credit bureaus and public credit registries. The study found that both information sharing channels have a positive and significant impact on financial access. The study also found that public credit registries complement the formal financial sector to promote financial access. The policy implications are discussed. |
| Keywords: | Information asymmetry; Financialisation; Financial Access; Africa |
| JEL: | G20 G29 L96 O40 O55 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:18/019&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria) |
| Abstract: | In this study, we examine the role of information and communication technology in complementing information sharing bureaus (or private credit bureaus and public credit registries) for financial sector competition. Hitherto unexplored dimensions of financial sector competition are employed, namely: financial sector dynamics of formalization, informalization and non-formalization. The empirical evidence is based on 53 African countries for the period 2004-2011 and the Generalised Method of Moments (GMM) with forward orthogonal deviations. The findings differ across financial sectors in terms of marginal, net and threshold effects. By introducing the concept of financialization, the study unites two streams of research by: improving the macroeconomic literature on measuring financial development and responding to an evolving field of development literature by means of informal finance. Moreover, a practical method by which to disentangle the effects of reducing information asymmetry on various financial sectors is suggested. Policy implications are discussed. |
| Keywords: | Information sharing; Banking competition; Africa |
| JEL: | G20 G29 L96 O40 O55 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:18/035&r=all |