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Evaluating The Relationship Between Official Economy And Shadow Economy In Romania. A Structural Vector Autoregressive Approach

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  • Adriana AnaMaria DAVIDESCU

    (Department of Statistics and Econometrics, Bucharest University of Economic Studies)

Abstract

Official economic situation plays a crucial role in people's decision to work or not in the informal sector. In a booming official economy, people have a lot of opportunities to earn a good salary and even extra money. This is not the case of an economy in recession, when people try to compensate the loss of income from formal economy through involvement in the informal economy. The paper aims to evaluate the relationship between official economy and shadow economy for the case of Romania using quarterly data covering the period 20000Q1-2013Q4.In order to do that, a structural vector autoregressive approach(SVAR) was used. The relationship between the two variables is tested by imposing a long-run restriction in the Structural VAR model to analyze the effect in the size of Romanian shadow economy to a temporary shock in real GDP. The impulse response function generated by the Structural VAR confirms that in the short-run, a rise in the official economy will lead to a decrease in the size of the shadow economy.

Suggested Citation

  • Adriana AnaMaria DAVIDESCU, 2014. "Evaluating The Relationship Between Official Economy And Shadow Economy In Romania. A Structural Vector Autoregressive Approach," Journal of Social and Economic Statistics, Bucharest University of Economic Studies, vol. 3(2), pages 57-65, DECEMBER.
    • Handle: RePEc:aes:jsesro:v:3:y:2014:i:2:p:57-65
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    References listed on IDEAS

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    Cited by:

    1. Stefan Petranov & Dimitar Zlatinov & Milen Velushev & Lillyana Georgieva & Radostina Ivcheva, 2022. "Shadow Economy and Production Factors: Results from an Empirical Analysis with a Panel Data Set," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 44-64.
    2. Moldovan (Gavril) Ioana Andrada, 2015. "Sustainable Development And Csr In The Financial Sector," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 217-221, January.
    3. Vasile Alecsandru STRAT, 2015. "Are the Central and East European Countries attracting the appropriate type of foreign direct investments?," Romanian Statistical Review, Romanian Statistical Review, vol. 63(4), pages 17-26, December.

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    More about this item

    Keywords

    shadow economy; real GDP index; MIMIC model; Structural VAR; Romania;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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