The shadow economy: a relevant factor for investment decisions in selected European Union countries

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Title: The shadow economy: a relevant factor for investment decisions in selected European Union countries
Authors: Kostova, Miroslava | Silva Cassorla, Carolina
Research Group/s: Métodos Cuantitativos para la Economía | Análisis Económico
Center, Department or Service: Universidad de Alicante. Departamento de Métodos Cuantitativos y Teoría Económica
Keywords: Shadow economy | Sovereign risk | Credit ratings | European Union | Member states
Knowledge Area: Fundamentos del Análisis Económico
Issue Date: 2015
Publisher: Institute of Public Finance
Citation: Financial Theory & Practice. 2015, 39(3): 305-323. doi:10.3326/fintp.39.3.3
Abstract: The estimation of sovereign risk indicators has a key role for the investment decisions. We were witnesses of inaccurate ratings before the last economic crisis, which altered significantly the results expected by many investors. Thus, we propose an improved rating estimation justifying the insertion of new variables, specifically, the shadow economy as a percentage of the GDP. We find that by taking it into account, the credit rating estimation improves. Our estimation assigns a higher sovereign risk to the new European Union member states, whereas the old European Union member states see their sovereign risk decreased.
ISSN: 1846-887X (Print) | 1845-9757 (Online)
DOI: 10.3326/fintp.39.3.3
Language: eng
Type: info:eu-repo/semantics/article
Rights: © Institute of Public Finance
Peer Review: si
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Appears in Collections:INV - Análisis Económico - Artículos de Revistas
INV - DMCTE - Artículos de Revistas

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