Summary
In the present study we estimate the size of the shadow economy for Malaysia using the modified-cash-deposit-ratio approach. Next, 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.
