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Estimating the Black Economy through a Monetary Approach: A Case Study of Pakistan

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  • Q M Ahmed
  • M Haider Hussain

Abstract

In recent years, the black economy has held enormous appeal for policy makers. Presence of black economy creates critical misrepresentation of macroeconomic variables in official estimates that lead to the false determination and delusional impact of economic policies. Similarly, black economy represents the unrecorded potential of the economy vis-?-vis resource generation and mobilization. The Economy of Pakistan underwent several minor tax reforms since 1960?s. However, the tax and tariff reform of 1990?s, committed under international pressure, was the first comprehensive exercise and therefore it becomes highly desirable to gauge its impact on the black economy and tax evasion practices. This paper, with some modifications, uses the standard monetary approach to obtain the latest estimates of the size of black economy and its macroeconomic implications thereof.

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Bibliographic Info

Article provided by Economic Issues in its journal Economic Issues.

Volume (Year): 13 (2008)
Issue (Month): 1 (March)
Pages: 45-60

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Handle: RePEc:eis:articl:108ahmed

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  1. Feige, Edgar L., 1990. "Defining and estimating underground and informal economies: The new institutional economics approach," World Development, Elsevier, vol. 18(7), pages 989-1002, July.
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  10. 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.
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