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The Use of Cash and the Size of the Shadow Economy in Sweden

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Author Info

  • Guibourg, Gabriela

    ()
    (Monetary Policy Department, Central Bank of Sweden)

  • Segendorf, Björn

    ()
    (International Secretariat, Central Bank of Sweden)

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    Abstract

    We use an “unexplained demand for cash” approach to measure the size of the shadow economy in Sweden. The size of the shadow economy is found to have increased from 3.8 to 6.5 per cent of GDP from 1990 to 2004. This result is also supported by our finding of an increased residual between households’ recorded disposable income and their consumption, investments and changes in net financial positions. Moreover, the correlation between the demand for cash that cannot be explained by recorded transactions and this residual is strong.

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    File URL: http://www.riksbank.se/upload/Dokument_riksbank/Kat_foa/2007/wp204.pdf
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    Bibliographic Info

    Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 204.

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    Length: 16 pages
    Date of creation: 01 Mar 2007
    Date of revision:
    Handle: RePEc:hhs:rbnkwp:0204

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    Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
    Phone: 08 - 787 00 00
    Fax: 08-21 05 31
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    Web page: http://www.riksbank.com/
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    Related research

    Keywords: Cash use; demand for cash; shadow economy; National Accounts; Financial Accounts;

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    1. Houston, Joel F., 1990. "The policy implications of the underground economy," Journal of Economics and Business, Elsevier, vol. 42(1), pages 27-37, February.
    2. Juin-jen Chang & Ching-chong Lai, 2004. "Collaborative tax evasion and social norms: why deterrence does not work," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 344-368, April.
    3. James Alm & Benno Torgler, 2004. "Culture Differences and Tax Morale in the United States and in Europe," CREMA Working Paper Series 2004-14, Center for Research in Economics, Management and the Arts (CREMA).
    4. Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
    5. Humphrey, David & Kaloudis, Aris & Owre, Grete, 2004. "The future of cash: falling legal use and implications for government policy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(3), pages 221-233, July.
    6. Wenzel, Michael, 2005. "Misperceptions of social norms about tax compliance: From theory to intervention," Journal of Economic Psychology, Elsevier, vol. 26(6), pages 862-883, December.
    7. Mikael Stenkula, 2004. "The Euro Cash Changeover Process," Kyklos, Wiley Blackwell, vol. 57(2), pages 265-286, 05.
    8. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
    9. 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.
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