In the present study we estimate the size of the shadow economy for Malaysia using the modified-cash-deposit-ratio (MCDR) approach. Subsequently, we relate shadow economy with its determinants such as national income, government spending, stock market development, misery index and tax burden. Our emphasis in this study is on the role of Islamic stock market in mitigating shadow economy in Malaysia. We consider Bursa Malaysia as an Islamic stock market as more than 70% of the companies listed in the Bursa Malaysia stock indices are Sharia-compliant. Our results clearly suggest that there is a role for Islamic stock market in reducing the size of shadow economy in Malaysia.

The objective of this study are to examine the impact of colonization on former colonies on their economic growth performances. The relationship between economic growth and selected independents variables are discussed covering 72 former colonies for the period of 1995 to 2015. The objective is to investigate the determinants of growth in former colonies colonized by four former conquerors namely Spain, France, The United Kingdom and The Soviet Union (Russian Federation). To achieve this objectives, we employed Generalized Method of Moment (GMM) estimator popularized by Arellano and Bond (1991) and Blundell and Bond (1998) and the independent variables of the estimation to achieve the targeted objectives, are the control variables of growth gross fixed capital formation (GFCF), as a proxy for capital and total population (TPOP) as a proxy for labor. This study also uses other independent variables such as length of colonial period (COLOH) which is the focus variable, domestic credit to private sector (DCPS), trade openness (TOP), foreign direct investment (FDI) and a couple of institutional qualities representing variables such political rights (PR) and civil liberties (CL). The results are quite consistent and robust - colonization is positive and highly significant implying that colonization indeed has a positive impact on the colonized countries, though the masters are perceived as parasites. They also prepare the right infrastructures that could enable the colonized countries to grow economically. As for the other variables including the control variables population, domestic credit to private, trade openness, and gross fixed capital formation are also positive and significantly related.

This paper explores the link between the shadow economy and financial sector development in Malaysia for the period 1971-2013. We calculate the size of the shadow economy by using the modified-cash-deposits-ratio approach recently developed by Pickhardt and Sardia (2011). We investigate the contention made by Blackburn et al. (2012) that financial sector development can mitigate shadow economy, higher level of financial sector development lead to lower level of shadow economy. Our results show that there is a non-linear long-run relationship between shadow economy and financial sector development in Malaysia, an inverted-U shape curve, suggesting that at lower (higher) level of financial sector development commensurate with higher (lower) level of the shadow economy. One policy implication from this study is that the financial sector can play an important role in reducing shadow economy by improving the accessibility to financing and to the credit market.