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The hard shadow of the Greek economy: new estimates of the size of the underground economy and its fiscal impact

Author

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  • Wolfram Berger
  • Michael Pickhardt
  • Athanassios Pitsoulis
  • Aloys Prinz
  • Jordi Sardࠍ

Abstract

This article presents new estimates of the Greek underground economy and explores the link between the underground economy and aggregate debt. We show that the Greek underground economy has been underestimated heavily and has been on a rising trend again since Greece adopted the Euro. We also present evidence that the size of the underground economy is positively related to the debt-to-GDP ratio, implying that fighting the underground economy is also conducive to financial and macroeconomic stability. Our results suggest that for our sample of 11 EMU member countries, the loss of the inflation tax as an economic policy instrument had drastic consequences. While the underground economy did not have a statistically significant impact on aggregate debt before the introduction of the Euro, it has pushed up the debt-to-GDP ratio in our sample since.

Suggested Citation

  • Wolfram Berger & Michael Pickhardt & Athanassios Pitsoulis & Aloys Prinz & Jordi Sardࠍ, 2014. "The hard shadow of the Greek economy: new estimates of the size of the underground economy and its fiscal impact," Applied Economics, Taylor & Francis Journals, vol. 46(18), pages 2190-2204, June.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:18:p:2190-2204
    DOI: 10.1080/00036846.2014.896984
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    Citations

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    Cited by:

    1. Niklas Potrafke & Markus Reischmann, 2016. "How to Deal with the Crisis in Greece – A Survey of International Experts," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(10), pages 34-36, May.
    2. Tran, My Thi Ha, 2021. "Public Sector Management And Corruption In Asean Plus Six," OSF Preprints stxw4, Center for Open Science.
    3. Gamal, Awadh Ahmed Mohammed & Rambeli, Norimah & Abdul Jalil, Norasibah & Kuperan Viswanathan, K., 2019. "A modified Currency Demand Function and the Malaysian shadow economy: Evidence from ARDL bounds testing approach," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 266-281.
    4. Niklas Potrafke & Markus Reischmann, 2016. "How to Handle the Crisis in Greece? Empirical Evidence Based on a Survey of Economics Experts," CESifo Working Paper Series 5860, CESifo.
    5. Paraskevi Koufopoulou & Colin C. Williams & Athanassios Vozikis & Kyriakos Souliotis & Antonios Samprakos, 2021. "Estimating Shadow Economy Size in Greece 2000 - 2018: A Flexible MIMIC Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 71(3-4), pages 23-47, July-Dece.
    6. Hajilee, Massomeh & Stringer, Donna Y. & Hayes, Linda A., 2021. "On the link between the shadow economy and stock market development: An asymmetry analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 303-316.
    7. Abdullah Bin Zafar & Tanvir Ahmed Tuhin, 2024. "An Ordinary Least Squares Approach Measuring the Impact of Factors Affecting the Underground Economy of Bangladesh and Their Implications in the Context of the Country’s Supply Chain," International Journal of Science and Business, IJSAB International, vol. 34(1), pages 92-107.

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