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

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Author Info
Yoke-Kee Eng () (Universiti Tunku Abdul Rahman)
Chin-Yoong Wong () (Universiti Tunku Abdul Rahman)

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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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File URL: http://economicsbulletin.vanderbilt.edu/2008/volume3/EB-08C20049A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 3 (2008)
Issue (Month): 58 ()
Pages: 1-10
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ebl:ecbull:v:3:y:2008:i:58:p:1-10

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Related research
Keywords: Underground economy; Informal sector; Business cycles;

Find related papers by JEL classification:
C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

References listed on IDEAS
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  1. Trevor Breusch, 2005. "Australia's Cash Economy: Are the estimates credible?," Macroeconomics 0509025, EconWPA, revised 23 Sep 2005. [Downloadable!]
  2. Bruno Chiarini & Elisabetta Marzano, 2006. "Market Consumption and Hidden Consumption: A Test for Substitutability," Discussion Papers 12_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
    Other versions:
  3. Trevor Breusch, 2005. "Australia's Cash Economy: Are the Estimates Credible?," The Economic Record, The Economic Society of Australia, vol. 81(255), pages 394-403, December. [Downloadable!] (restricted)
  4. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October. [Downloadable!] (restricted)
  5. Khurshid Kiani, 2005. "Detecting Business Cycle Asymmetries Using Artificial Neural Networks and Time Series Models," Computational Economics, Springer, vol. 26(1), pages 65-89, August. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
    Other versions:
  8. 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, vol. 73(222), pages 225-32, September.
  9. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA. [Downloadable!]
  10. Friedrich Schneider & Dominik H. Enste, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March. [Downloadable!] (restricted)
  11. Holly, Sean & Stannett, Mike, 1995. "Are There Asymmetries in UK Consumption? A Time Series Analysis," Applied Economics, Taylor and Francis Journals, vol. 27(8), pages 767-72, August.
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