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The monetary method to measure the shadow economy: The forgotten problem of the initial conditions

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  • Ahumada, Hildegart
  • Alvaredo, Facundo
  • Canavese, Alfredo

Abstract

We show that when the money demand function used to estimate the size of the shadow economy includes the lagged dependent variable, the need to assume a known initial condition reappears as it was the case in the early monetary methods.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 101 (2008)
Issue (Month): 2 (November)
Pages: 97-99

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Handle: RePEc:eee:ecolet:v:101:y:2008:i:2:p:97-99

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Underground economy Informality Monetary method;

References

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  1. 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.
  2. Isachsen, Arne Jon & Strom, Steiner, 1985. "The Size and Growth of the Hidden Economy in Norway," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(1), pages 21-38, March.
  3. Trevor Breusch, 2005. "Australia's Cash Economy: Are the estimates credible?," Macroeconomics 0509025, EconWPA, revised 23 Sep 2005.
  4. Hildegart Ahumada & Facundo Alvaredo & Alfredo Canavese, 2007. "The Monetary Method And The Size Of The Shadow Economy: A Critical Assessment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(2), pages 363-371, 06.
  5. Schneider, Friedrich, 1986. " Estimating the Size of the Danish Shadow Economy Using the Currency Demand Approach: An Attempt," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(4), pages 643-68.
  6. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Chapters, in: The Demand for Currency Relative to Total Money Supply, pages 1-37 National Bureau of Economic Research, Inc.
  7. Philip Cagan, 1958. "The Demand for Currency Relative to Total Money Supply," NBER Books, National Bureau of Economic Research, Inc, number caga58-1, July.
  8. Edgar L. Feige, 2004. "How Big IS the Irregular Economy?," Macroeconomics 0404005, EconWPA.
  9. Tanzi, Vito, 1999. "Uses and Abuses of Estimates of the Underground Economy," Economic Journal, Royal Economic Society, vol. 109(456), pages F338-47, June.
  10. Phillip Cagan, 1958. "The Demand for Currency Relative to the Total Money Supply," Journal of Political Economy, University of Chicago Press, vol. 66, pages 303.
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Citations

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Cited by:
  1. Gerhard Graf, 2011. "Some stylised facts about cash and black economies in Germany," European Journal of Law and Economics, Springer, vol. 32(1), pages 51-67, August.
  2. Pickhardt, Michael & Sardà, Jordi, 2011. "Size and causes of the underground economy in Spain: A correction of the record and new evidence from the MCDR approach," CAWM Discussion Papers 54, Center of Applied Economic Research Münster (CAWM), University of Münster.
  3. Quintano, Claudio & Mazzocchi, Paolo, 2013. "The shadow economy beyond European public governance," Economic Systems, Elsevier, vol. 37(4), pages 650-670.
  4. Muhammad Farooq Arby & Muhammad Jahanzeb Malik & Muhammad Nadim Hanif, 2010. "The Size of Informal Economy in Pakistan," Working Papers id:2493, eSocialSciences.
  5. HALICIOGLU, Ferda & Dell’Anno, Roberto, 2009. "An ARDL model of unrecorded and recorded economies in Turkey," MPRA Paper 24982, University Library of Munich, Germany.
  6. Pickhardt, Michael & Sardà, Jordi, 2011. "Cash, hoarding and the underground economy," CAWM Discussion Papers 56, Center of Applied Economic Research Münster (CAWM), University of Münster.
  7. James Alm & Abel Embaye, 2013. "Using Dynamic Panel Methods to Estimate Shadow Economies Around the World, 1984-2006," Working Papers 1303, Tulane University, Department of Economics.
  8. Kari Takala & Matti Viren, 2012. "Why does a Large Shadow Economy not show up in Administrative Inspections?," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 42(2), pages 257-272, September.
  9. Michael Pickhardt & Jordi Sarda, 2011. "The size of the underground economy in Germany: a correction of the record and new evidence from the modified-cash-deposit-ratio approach," European Journal of Law and Economics, Springer, vol. 32(1), pages 143-163, August.

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