IDEAS home Printed from https://ideas.repec.org/a/cvv/journ1/v7y2020i1p27-46.html

Modelling the shadow economy of South Africa: Using the currency demand and MIMIC approach

Author

Listed:
  • Mangalani P.MAKANANISA

    (South African Revenue Service, Operational Research, Pretoria, South Africa)

  • Cathrine T.KOLOANE

    (South African Revenue Service, Operational Research, Pretoria, South Africa)

  • Friedrich SCHNEIDER

    (Johannes Kepler University Linz, Research Institute for Banking &Finance, Linz, Austria)

Abstract

This paper estimates the size and development of the South African shadow economy (SE) using two indirect approaches namely, the Multivariate Indicator Multivariate Causes (MIMIC) model and the Currency Demand Approach (CDA). The study uses time series from 2000 to 2019 (using quarterly data) to estimate the SE of South Africa for the period 2004 to 2018. The average estimated size of the SE from the CDA and MIMIC model are 22.47% and 25.45% respectively. Overall, the MIMIC and CDA models are both showing a slight decreasing trend for the same period. The study recommends further analysis to be conducted on economic segments in order to explore the SE activity distribution between different economic sectors; resulting in an easier way to identify, locate and monitor unrecorded businesses and also increase revenue collections and minimise non-compliance for different sectors

Suggested Citation

  • Mangalani P.MAKANANISA & Cathrine T.KOLOANE & Friedrich SCHNEIDER, 2020. "Modelling the shadow economy of South Africa: Using the currency demand and MIMIC approach," Journal of Economics and Political Economy, EconSciences Journals, vol. 7(1), pages 27-46, March.
    • Handle: RePEc:cvv:journ1:v:7:y:2020:i:1:p:27-46
    as

    Download full text from publisher

    File URL: https://journals.econsciences.com/index.php/JEPE/article/view/2025/2041
    Download Restriction: no
    File URL: https://journals.econsciences.com/index.php/JEPE/article/view/2025
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Farzanegan, Mohammad Reza, 2009. "Illegal trade in the Iranian economy: Evidence from a structural model," European Journal of Political Economy, Elsevier, vol. 25(4), pages 489-507, December.
    2. Schneider Friedrich & Hametner Bettina, 2014. "The Shadow Economy in Colombia: Size and Effects on Economic Growth," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(2), pages 293-325, April.
    3. Friedrich Schneider & Kausik Chaudhuri & Sumana Chatterjee, 2003. "The Size and Development of the Indian Shadow Economy and a Comparison with other 18 Asian Countries: An Empirical Investigation," Economics working papers 2003-02, Department of Economics, Johannes Kepler University Linz, Austria.
    4. Andreas Buehn & Mohammad Reza Farzanegan, 2013. "Impact of education on the shadow economy: Institutions matter," Economics Bulletin, AccessEcon, vol. 33(3), pages 2052-2063.
    5. 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, June.
    6. 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.
    7. Friedrich Schneider & Andreas Buehn & Claudio Montenegro, 2010. "New Estimates for the Shadow Economies all over the World," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 443-461.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mai HASSAN & Friedrich SCHNEIDER, 2016. "Modelling the Egyptian Shadow Economy: A MIMIC model and A Currency Demand approach," Journal of Economics and Political Economy, EconSciences Journals, vol. 3(2), pages 309-339, June.
    2. Mai Hassan & Friedrich Schneider, 2016. "Modelling the Egyptian Shadow Economy: A Currency Demand and A MIMIC Model Approach," CESifo Working Paper Series 5727, CESifo.
    3. Feige, Edgar L., 2015. "Reflections on the meaning and measurement of Unobserved Economies: What do we really know about the “Shadow Economy”?," MPRA Paper 68466, University Library of Munich, Germany.
    4. Farzanegan, Mohammad Reza & Hassan, Mai & Badreldin, Ahmed Mohamed, 2020. "Economic liberalization in Egypt: A way to reduce the shadow economy?," Journal of Policy Modeling, Elsevier, vol. 42(2), pages 307-327.
    5. Awadh Ahmed Mohammed Gamal & Jauhari Dahalan & K. Kuperan Viswanathan, 2020. "An econometric analysis of the underground economy and tax evasion in Kuwait," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 25(3), pages 307-331.
    6. Afonso, Oscar & Neves, Pedro Cunha & Pinto, Tiago, 2020. "The non-observed economy and economic growth: A meta-analysis," Economic Systems, Elsevier, vol. 44(1).
    7. 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.
    8. 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.
    9. Friedrich Schneider & Mangirdas Morkunas & Erika Quendler, 2021. "Measuring the Immeasurable: The Evolution of the Size of Informal Economy in the Agricultural Sector in the EU-15 up to 2019," CESifo Working Paper Series 8937, CESifo.
    10. Luisanna Onnis & Patrizio Tirelli, 2015. "Shadow economy: Does it matter for money velocity?," Empirical Economics, Springer, vol. 49(3), pages 839-858, November.
    11. Hassan, Mai & Schneider, Friedrich, 2016. "Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013," IZA Discussion Papers 10281, Institute of Labor Economics (IZA).
    12. Dell’Anno, Roberto & Davidescu, Adriana AnaMaria, 2019. "Estimating shadow economy and tax evasion in Romania. A comparison by different estimation approaches," Economic Analysis and Policy, Elsevier, vol. 63(C), pages 130-149.
    13. K K C Sineth Kannangara & Yanrui Wu, 2023. "Shadow Economy in Sri Lanka: A Review and New Estimates," Economics Discussion / Working Papers 23-04, The University of Western Australia, Department of Economics.
    14. Eduardo Augusto Soares Coelho Barbosa & Samuel Cruz Alves Pereira & Elísio Fernando Moreira Brandão, 2013. "The Shadow Economy in Portugal: An Analysis Using the MIMIC Model," FEP Working Papers 514, Universidade do Porto, Faculdade de Economia do Porto.
    15. Souleymane OUEDRAOGO & Abou KANE, 2024. "Taille de l’économie informelle et croissance économique dans les pays de l’UEMOA," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 60, pages 113-140.
    16. Berdiev, Aziz N. & Saunoris, James W., 2025. "Navigating the shadows: Exploring the interaction between social progress and the shadow economy," World Development, Elsevier, vol. 192(C).
    17. Luisanna Onnis & Patrizio Tirelli, 2011. "Institutions, policies and economic development. What are the causes of the shadow economy?," Working Papers 206, University of Milano-Bicocca, Department of Economics, revised Mar 2011.
    18. Joseph Keneck-Massil & Alphonse Noah, 2019. "Shadow economy and educational systems in Africa," Economics Bulletin, AccessEcon, vol. 39(2), pages 1467-1478.
    19. Roberto Dell'Anno & Ferda Halicioglu, 2010. "An ARDL model of unrecorded and recorded economies in Turkey," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(6), pages 627-646, November.
    20. Adriana AnaMaria Davidescu (Alexandru) & Ion Dobre, 2013. "The Impact of Unemployment Rate on the Size of Romanian Shadow Economy," Public Finance Review, , vol. 41(5), pages 578-607, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • I2 - Health, Education, and Welfare - - Education
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cvv:journ1:v:7:y:2020:i:1:p:27-46. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bilal KARGI (email available below). General contact details of provider: https://journals.econsciences.com/index.php/JEPE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.