Skip to main content

Advertisement

SpringerLink
Log in

Dynamic effects of shadow economy and environmental pollution on the energy stock prices: empirical evidence from OECD countries

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Data availability

Data used in this study will be provided upon request.

References

  • Abid M (2015) The close relationship between carbon informal economic growth and carbon emissions in Tunisia since 1980: the (ir)relevance of structural breaks. Sustain Cities Soc 15:11–21

    Article  Google Scholar 

  • Aloui C, Nguyen DK, Njeh H (2012) Assessing the impacts of oil price fluctuations on stock returns in emerging markets. Econ Model 29:2686–2695

    Article  Google Scholar 

  • Arellano M, Bond S (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud 58(2):277–297

    Article  Google Scholar 

  • Arellano M, Bover O (1995) Another look at the instrumental variable estimation of error-components model. J Econ 68(1):29–51

    Article  Google Scholar 

  • Baksi S, Bose P (2010) Environmental regulation in the presence of an informal sector. Departmental working papers 2010–03, The University of Winnipeg, Department of Economics

  • Baloch MA, Danish, Meng F (2019) Modeling the non-linear relationship between financial development and energy consumption: statistical experience from OECD countries. Environ Sci Pollut Res 26:8838–8846. https://doi.org/10.1007/s11356-019-04317-9

    Article  Google Scholar 

  • Baloch MA, Danish, Khan SU-D, Ulucak ZŞ (2020a) Poverty and vulnerability of environmental degradation in Sub-Saharan African countries: what causes what? Struct Chang Econ Dyn 54:143–149. https://doi.org/10.1016/j.strueco.2020.04.007

    Article  Google Scholar 

  • Baloch MA, Danish, Khan SU-D, Ulucak ZŞ, Ahmad A (2020b) Analyzing the relationship between poverty, income inequality, and CO2 emission in Sub-Saharan African countries. Sci Total Environ 740:139867. https://doi.org/10.1016/j.scitotenv.2020.139867

    Article  CAS  Google Scholar 

  • Baum CF, Schaffer ME (2003) Instrumental variables and GMM: estimation and testing. Stata J 3(1):1–31

    Article  Google Scholar 

  • Bayar Y, Öztürk OF (2016) Financial development and shadow economy in European Union Transition Economies. Managing Global Transitions 14(2):157–173

    Google Scholar 

  • Berdiev AN, Saunoris JW (2016) Financial development and the shadow economy: a panel VAR analysis. Econ Model 57:197–207

    Article  Google Scholar 

  • Blackburn K, Bose N, Capasso S (2012) Tax evasion, the underground economy and financial development. J Behav Organ 83:243–253

    Article  Google Scholar 

  • Blackman A (2000) An informal sector pollution control: what policy options do we have? World Dev 28(12):2067–2082

    Article  Google Scholar 

  • Blundell R, Bond S (1998) Initial conditions and moment restrictions in dynamic panel data models. J Econ 87(1):115–143

    Article  Google Scholar 

  • Bose N, Capasso S, Wurm M (2008) The impact of banking development on the size of shadow economy. Centre for studies in Economics and Finance, Working Paper No. 207

  • Bose N, Capasso S, Wurm MA (2012) The impact of banking development on the size of shadow economies. J Econ Stud 39(6):620–638

    Article  Google Scholar 

  • Bowsher CG (2002) On testing over identifying restrictions in dynamic panel data models. Econ Lett 77:211–220

    Article  Google Scholar 

  • Brouwers R, Schoubben F, Hulle CV, Uytbergen SV (2016) The initial impact of EU ETS verification events on stock prices. Energy Policy 94:138–149

    Article  Google Scholar 

  • Canh NP, Tahanh SD, Schinakus C, Bensemann J, Thanh LT (2019) Global emissions: a new contribution from the shadow economy. Int J Energy Econ Policy 9(3):320–337

    Article  Google Scholar 

  • Capasso S, Jappelli T (2013) Financial development and underground economy. J Dev Econ 101:167–178

    Article  Google Scholar 

  • Chaudhuri S, Mukhopadhyay U (2003) Pollution and informal sector: a theoretical analysis. Journal of Economic Integration 21:363–378. https://doi.org/10.11130/jei.2006.21.2.363

  • Chen H, Hao Y, Li J, Song X (2018) The impact of environmental regulation, shadow economy and corruption on environmental quality: theory and empirical evidence from China. J Clean Prod 195:200–214

    Article  Google Scholar 

  • Coban S, Topcu M (2013) The nexus between financial development and energy consumption in the EU: a dynamic panel data analysis. Energy Econ Int J Energy Econ Policy 3:2146–4553

    Google Scholar 

  • Dabla-Norris E, Grandstein M, Inchauste G (2008) What causes firms to hide output? The determinants of informality. J Dev Econ 85:1–27

    Article  Google Scholar 

  • Elgin C, Uras B (2013) Public debt, sovereign default risk and shadow economy. Journal of Financial Stability 9(4):628–640

  • Elgin C, Oztunali O (2014) Pollution and informal economy. Econ Syst 38(3):333–349

    Article  Google Scholar 

  • Elgin C, Schneider F (2016) Shadow economies in OECD Countries: DGE vs. MIMIC approaches. Bogazici Journal 30:51–75. https://doi.org/10.21773/boun.30.1.3

  • Ersoy E, Ünlü U (2013) Energy consumption and stock market relationship. Int J Energy Econ Policy 3:34–40

    Google Scholar 

  • Fethi MD, Fethi S, Katircioglu ST (2006) Estimating the size of the Cypriot underground economy a comparison with European experience. J Manpow 27(6):515–534

    Article  Google Scholar 

  • Filis G (2010) Macroeconomy, stock market and oil prices: do meaningful relationship exist among their cyclical fluctuations? Energy Econ 32:877–886

    Article  Google Scholar 

  • Georgiou MN. The impact of shadow economy on the stock market volatility. A Worldwide Panel Data Analysis (November 14, 2013). Available at SSRN: https://ssrn.com/abstract=2354369 or https://doi.org/10.2139/ssrn.2354369

  • Gobbi G, Zizza R (2007) Does the underground economy hold back financial deepening? Evidence from the Italian credit market. Bank of Italy, Working Paper No. 646

  • Gobbi G, Zizza R (2012) Does the underground economy hold back financial deepening? Economia Marche- J Appl Econ 31(1)

  • Greenwood J, Jovanovic B (1990) Financial development, growth, and the distribution of income. J Polit Econ 98(5):1076–1107

    Article  Google Scholar 

  • Greenwood J, Smith B (1997) Financial markets in development, and the development of financial markets. J Econ Dyn Control 21(1):145–181

    Article  Google Scholar 

  • Hadi MD, Katircioglu S, Adaoglu C (2019) The vulnerability of tourism firms’ to the terrorist incidents, current issues in tourism (in Press, https://doi.org/10.1080/13683500.2019.1592124))

  • Hassan M, Schineder F (2016) Size and development of shadow economics of 157 countries worldwide: updated new measures from 1999 to 2013. Discussion Paper Series No.10281

  • Ho SY (2018) Macroeconomic determinants of stock market development in South Africa. Int J Emerg Markets 14(2):322–342

    Article  Google Scholar 

  • Hsiao C (2014) Analysis of panel data, Cambridge university press, 2014

    Google Scholar 

  • Imamoglu H, Katircioglu S, Payaslioglu CE (2018) Financial services spillover effects on informal economic activity. Serv Ind J 38(10–11):669–687

    Article  Google Scholar 

  • Kahouli B (2019) Does static and dynamic relationship between economic growth and energy consumption exist in OECD countries? Energy Rep 5:104–116

    Article  Google Scholar 

  • Kalayci S, Koksal C (2015) The relationship between China’s airway freight in terms of carbon-dioxide emission and export volume. Int J Econ Perspect 9(4):60–68

    Google Scholar 

  • Kapusuzoglu A (2014) Causality relationships between carbon dioxide emissions and economic growth: results from a multi-country study. Int J Econ Perspect 8(2):5–15

    Google Scholar 

  • Katircioglu S, Katircioglu S (2018) Testing the role of fiscal policy in the environmental degradation: the case of Turkey. Environ Sci Pollut Res 25(6):5616–5630

    Article  Google Scholar 

  • Katircioglu S, Alkhazaleh MMH, Katircioglu S (2018) Interactions between oil prices and financial sectors’ performances: empirical evidence from Amman Stock Exchange. Environ Sci Pollut Res 25:33702–33708

    Article  Google Scholar 

  • Katircioglu S, Abasiz T, Sezer S, Katircioglu S (2019) Interactions between volatility of the alternative energy input prices and spillover effects: a VAR [MA] - MGARCH in BEKK approach for the Turkish economy. Environ Sci Pollut Res 26(11):10738–10745

    Article  Google Scholar 

  • Li Z, Chen WT, Chang IC, Lee JM (2020) Analysis of stock market development and CO2 emissions on OECD countries via an empirical model. Clean – Soil, Air, Water 48:1900360. https://doi.org/10.1002/clen.201900360

  • Ma X, Fu Q (2020) The influence of financial development on energy consumption: worldwide evidence. Int J Environ Res Public Health 17:1–15

    Google Scholar 

  • Markandya A, González-Eguino M, Escapa M (2013) From shadow to green: linking environmental fiscal reforms and the informal economy. Energy Econ 40(Supplement 1):S108–S118

    Article  Google Scholar 

  • Mazhar U, Elgin C (2013) Environmental regulation, pollution and informal economy. SBP Res Bull State Bank Pak Res Dev 9:62–81

    Google Scholar 

  • Medina L, Schneider F (2018) Shadow economies around the world: new results for 158 countries over 1991-2015. IMF Working Paper No. 18/17

  • Memiş A, Kapusuzoglu A (2015) The impacts of global oil prices fluctuations on stock markets: an empirical analysis for OECD countries. Int J Econ Perspect 9(1):80–91

    Google Scholar 

  • Mo JL, Zhu L, Fan Y (2012) The impact of the EU ETS on corporate value of European electricity corporations. Energy 45(1):3–11

    Article  Google Scholar 

  • Ngalawa H, Viegi N (2013) Interaction of formal and informal financial markets in quasi-emerging market economies. Econ Model 31:614–624

    Article  Google Scholar 

  • Nickell S (1981) Biases in dynamic models with fixed effects. Econometrica 49(6):1417–1426

    Article  Google Scholar 

  • Pesaran MH (2007) A simple panel unit root test in the presence of cross‐section dependence. J Appl Econom 22(2):265–312

  • Rahman M, Mustafa M (2017) Financial deepening and stock market returns: panel data analysis for selected developed and developing economies. Int J Econ Financ 10(1):96–109

    Google Scholar 

  • Ray S (2012) Testing granger causal relationship between macroeconomic variables and stock price behavior: evidence from India. Adv Appl Econ Finance 3(1):470–481

    Google Scholar 

  • Roodman D (2009) How to do- xtabond2: an introduction to difference and system GMM in Stata. Stata J 9(1):86–136

    Article  Google Scholar 

  • Sadorsky P (2010) The impact of financial development on energy consumption in emerging economies. Energy Policy 38(5):2528–2535

    Article  Google Scholar 

  • Sadorsky P (2011) Financial development and energy consumption in central and eastern European frontier economies. Energy Policy 3(2):999–1006

    Article  Google Scholar 

  • Schneider F (1986) Estimating the size of Danish economy using the currency demand approach: an attempt. Scand J Econ 88(4):643–668

    Article  Google Scholar 

  • Shaeri K, Adaoglu C, Katircioglu S (2016) Oil price risk exposure: a comparison of financial and non-financial subsectors. Energy 109:712–723

    Article  Google Scholar 

  • Svirydzenka K (2016) Introducing a new broad-based index of financial development. IMF Working Paper, WP 16/5

  • Tecel A, Katircioglu S, Taheri E, Bekun VF (2020) Causal interactions among tourism, foreign direct investment, domestic credits, and economic growth: evidence from selected mediterranean countries. Port Econ J 19:195–212

  • Williams CC (2011) Blurring the formal/informal economy divide: beyond a dual economies approach. Int J Econ Perspect 5(4):347–362

    Google Scholar 

  • Zhang F, Fang H, Wang X (2018) Impact of carbon prices on corporate value: the case of the case of China’s thermal listed enterprises, sustainability, MDPI. Open Access J 10(9):1–14 September

    Google Scholar 

Download references

Author information

Authors and Affiliations

  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

    Zehra Şenhaz & Salih Katircioglu

  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

    Setareh Katircioglu

Authors
  1. Zehra Şenhaz
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Setareh Katircioglu
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Salih Katircioglu
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

ZS constructed the Introduction section and estimated the results of models. The second author, SK, edited all sections and wrote results section. The third author, SK, constructed the research idea and research question, wrote conclusion section, and finalized editing the whole manuscript.

Corresponding author

Correspondence to Salih Katircioglu.

Ethics declarations

Conflict of interest

The authors declare that they have no conflict of interest.

Ethics approval and consent to participate

Not applicable.

Consent for publication

Not applicable.

Additional information

Responsible editor: Eyup Dogan

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Şenhaz, Z., Katircioglu, S. & Katircioglu, S. Dynamic effects of shadow economy and environmental pollution on the energy stock prices: empirical evidence from OECD countries. Environ Sci Pollut Res 28, 8520–8529 (2021). https://doi.org/10.1007/s11356-020-11226-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-020-11226-9

Keywords

Search

Navigation