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A short note on business cycles of underground output: are they asymmetric?

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  • Yoke-Kee Eng

    ()
    (Universiti Tunku Abdul Rahman)

  • Chin-Yoong Wong

    ()
    (Universiti Tunku Abdul Rahman)

Abstract

This short note as the first study investigates the symmetry of fluctuations of underground output around trend for four selected Southeast Asian countries, that is, Malaysia, Indonesia, Thailand, and Philippines, over the time horizon of 1970-2006. In particular, we test if the underground output falls below trend more drastically and severely at shorter time span than when rising above trend. We find no evidence that supports this hypothesis. We thus conclude that asymmetry in fluctuations around trend is not a primary concern in understanding the nature of underground economy. We suggest that the symmetry of fluctuation of underground output, in conjunction with the potential complementary effect on market consumption, may account for the widely documented expansionary fiscal contraction in developing countries.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 3 (2008)
Issue (Month): 58 ()
Pages: 1-10

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Handle: RePEc:ebl:ecbull:eb-08c20049

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Keywords: Underground economy;

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  1. Daniel E. Sichel, 1989. "Business cycle asymmetry: a deeper look," Working Paper Series / Economic Activity Section, Board of Governors of the Federal Reserve System (U.S.) 93, Board of Governors of the Federal Reserve System (U.S.).
  2. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 78(1), pages 156-190, October.
  3. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number mitc27-1.
  4. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 38(1), pages 77-114, March.
  5. Wesley Clair Mitchell, 1927. "Introductory pages to "Business Cycles: The Problem and Its Setting"," NBER Chapters, National Bureau of Economic Research, Inc, in: Business Cycles: The Problem and Its Setting, pages -23 National Bureau of Economic Research, Inc.
  6. Bruno Chiarini & Elisabetta Marzano, 2005. "Market consumpition and hidden consumption. A test for substitutability," Working Papers, University of Rome La Sapienza, Department of Public Economics 79, University of Rome La Sapienza, Department of Public Economics.
  7. Khurshid Kiani, 2005. "Detecting Business Cycle Asymmetries Using Artificial Neural Networks and Time Series Models," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 26(1), pages 65-89, August.
  8. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
  9. W.A. Razzak, 2001. "Business Cycle Asymmetries: International Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 230-243, January.
  10. Giles, David E A, 1997. "Testing for Asymmetry in the Measured and Underground Business Cycles in New Zealand," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 73(222), pages 225-32, September.
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Cited by:
  1. Catalina Granda-Carvajal, 2010. "The Unofficial Economy and the Business Cycle: A Test for Theories," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 24(4), pages 573-586.

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