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A short note on business cycles of underground output: are they asymmetric?

Author

Listed:
  • Yoke-Kee Eng

    (Universiti Tunku Abdul Rahman)

  • Chin-Yoong Wong

    (Universiti Tunku Abdul Rahman)

Abstract

This short note as the first study investigates the symmetry of fluctuations of underground output around trend for four selected Southeast Asian countries, that is, Malaysia, Indonesia, Thailand, and Philippines, over the time horizon of 1970-2006. In particular, we test if the underground output falls below trend more drastically and severely at shorter time span than when rising above trend. We find no evidence that supports this hypothesis. We thus conclude that asymmetry in fluctuations around trend is not a primary concern in understanding the nature of underground economy. We suggest that the symmetry of fluctuation of underground output, in conjunction with the potential complementary effect on market consumption, may account for the widely documented expansionary fiscal contraction in developing countries.

Suggested Citation

  • Yoke-Kee Eng & Chin-Yoong Wong, 2008. "A short note on business cycles of underground output: are they asymmetric?," Economics Bulletin, AccessEcon, vol. 3(58), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-08c20049
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    References listed on IDEAS

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    Cited by:

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    2. Catalina Granda-Carvajal, 2010. "The Unofficial Economy and the Business Cycle: A Test for Theories," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 573-586.
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    5. Gaetano Lisi, 2021. "Can the AD-AS Model Explain the Presence and Persistence of the Underground Economy? Evidence from Italy," Economies, MDPI, vol. 9(4), pages 1-11, November.

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    More about this item

    Keywords

    Underground economy;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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