Unmasking the shadow economy: the role of economic policy uncertainty, clean energy, and clean technology in BRICS nations

This study investigates the impact of economic policy uncertainty (EPU), clean energy (CE), and clean technology (CT) on the shadow economy across BRICS countries from 2001 to 2022. Using a robust econometric framework that includes Cross-Sectionally Augmented Autoregressive Distributed Lag (CS-ARDL) models, cointegration tests, and nonlinear autoregressive distributed lag (NARDL) estimations, the analysis captures both symmetric and asymmetric dynamics in short- and long-run contexts. The results reveal that a 1% increase in EPU leads to a 0.29% rise in the shadow economy in the long run, indicating significant regulatory evasion during uncertain periods. Conversely, CE and CT reduce the size of the shadow economy, with long-run elasticities of −0.31 and −0.25, respectively, suggesting their role in fostering transparency and formalisation. Asymmetric analysis further indicates that increases in EPU have a stronger adverse effect than decreases have in mitigating informality, and reductions in CE and CT amplify shadow economic activity more than their positive changes reduce it. The study employs panel data econometric techniques that correct for CD and slope heterogeneity, ensuring robust inference. The findings underscore the necessity of policy predictability, institutional strengthening, and sustained investment in green innovation to curb informal economic behaviour. Policy recommendations include expanding access to clean technologies, ensuring consistent energy transition strategies, and enhancing economic governance to foster a more inclusive and formal economic environment in emerging economies.