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Macroeconomic aspects of the grey economy - the case of Macedonia

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  • Nenovski, Tome

Abstract

Compared regionally, Republic of Macedonia has one of the highest levels of grey economy activity. According to some estimations, it accounts for about 40% of GDP. This high level of grey economy has a direct influence to the main economic indicators, categories and instruments for macroeconomic regulation: GDP value cannot be precisely measured, there are problems in formulating and realization of macroeconomic policy instruments (fiscal policy, monetary policy, social policy, foreign-trade policy), etc. Because of its high value, grey economy is challenging and serious danger for macroeconomic planning and regulation. By using qualitative, descriptive, statistic and comparative methodologies, this research attempts to locate causes, consequences and the scope of grey economy in Republic of Macedonia. It also presents different ways for measurement of the size of grey economy in the Republic of Macedonia and understands the basic characteristics of the Macedonian case in order to present well‐grounded policy recommendations. The main finding (conclusion) of the paper is the fact that the grey economy in The Republic of Macedonia is a multifaceted phenomenon and the most efficient manner to remove the causes for the occurrence and presence of the grey economy is the improvement of the institutional frame in the country. There is a need for directly focused Government measures that would precipitate the integration of the grey economy in the formal sector, once the right conditions are put in place. The recommendations that this paper promotes will head exactly in that direction. The main recommendation is directed towards activities and measures of the authorities for preventing and removing the reasons of grey economy appearance and punishment of the consequences of this national economy “evil”. Another recommendation is for the Government to increase the speed for redefining (changing) its role on the market. Although there are noticeable signs that the situation has been changing, there is a need for widening the awareness of all business players for the necessity of playing by the rules as well as for enforcing the institutional framework, legal order, moral values and the motivators of the country’s functional economy.

Suggested Citation

  • Nenovski, Tome, 2012. "Macroeconomic aspects of the grey economy - the case of Macedonia," MPRA Paper 42253, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42253
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    File URL: https://mpra.ub.uni-muenchen.de/42253/3/MPRA_paper_42253.pdf
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    References listed on IDEAS

    as
    1. Bruno Frey & Friedrich Schneider, 2000. "Informal and underground economy," Economics working papers 2000-04, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Fethi Ogunc & Gokhan Yilmaz, 2000. "Estimating The Underground Economy In Turkey," Discussion Papers 0004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    3. Katarina Ott, 2002. "The Underground Economy in Croatia," Occasional paper series 12, Institute of Public Finance.
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    Cited by:

    1. Marko Crnogorac & Santiago Lago-Pe?as, 2019. "Tax evasion in the countries of Former Yugoslavia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 823-851.
    2. Marko Crnogorac & Santiago Lago-Peñas, 2018. "Tax evasion in Former Yugoslavian countries," Working Papers. Collection A: Public economics, governance and decentralization 1811, Universidade de Vigo, GEN - Governance and Economics research Network.

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    More about this item

    Keywords

    macroeconomics; grey economy; informal economy; formal economy; tax evasion;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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