Victoria Bozhenko

Department of Economic Cybernetics, 

Sumy State University,

Ukraine

v.bozhenko@uabs.sumdu.edu.ua 

ORCID 0000-0002-9435-0065

Shadow economy and financial stability from the perspective of finance digitalization

Anton Boyko

Department of Economic Cybernetics, 

Sumy State University,

Ukraine 

a.boiko@uabs.sumdu.edu.ua

ORCID 0000-0002-1784-9364

Martin Vondráček

Faculty of Economics and Management,

Czech University of Life Sciences Prague

Czech Republic

vondracekm@pef.czu.cz

ORCID 0000-0002-1472-948X

Péter Karácsony

Obuda University,

Keleti Karoly Faculty of Business and Management

Budapest, Hungary

karacsony.peter@uni-obuda.hu 

ORCID 0000-0001-7559-0488

Abstract. Digital financial technologies create a basis for forming new concepts for studying the prerequisites for the emergence of the shadow economy, the search for mechanisms to counteract illicit financial flows, and ensuring financial stability in the country. The article aims to assess the degree of connections between the shadow economy, financial stability and finance digitalization using the principles of cognitive modelling. The empirical study proved that the current status of development of digital finance and financial strength in Ukraine is sufficient for a significant reduction of shadow operations in the economy, namely to the level of 14.43% of GDP, which is 55.8% less compared to the average annual value for the period 2005-2021 years. It is advisable to implement a set of measures aimed at increasing the volume of the cashless economy; reducing non-performing loans; optimization of banking infrastructure; encouraging citizens to use online banking; reduction in the level of fictitious direct investments.

Received: September, 2023

1st Revision: March, 2024

Accepted: June, 2024

DOI: 10.14254/2071-8330.2024/17-2/10

JEL Classification: C61, O17, E44

Keywords: economic growth, digital, financial services, financial inclusion, illicit financial flows, shadow economy