IDEAS home Printed from https://ideas.repec.org/a/rsr/journl/v63y2015i4p46-62.html
   My bibliography  Save this article

The Relationship between Shadow Economy and Unemployment Rate. A Ardl Causality Analysis for the Case Of Romania

Author

Listed:
  • Adriana AnaMaria DAVIDESCU

    (Bucharest University of Economic Studies)

Abstract

The paper aims to investigate the nature of the relationship between the shadow economy (SE) and unemployment rates (both registered and ILO) for the case of Romania using Pesaran et al.(2001) bounds tests approach for cointegration. The study uses quarterly data covering the period 2000-2010. The size of Romanian shadow economy is estimated using the currency demand approach based on VECM models, stating that its size is decreasing over the analyzed period, from 36.5% at the end of 2000 to about 31.5% of real GDP at the middle of 2010.To investigate the long-run causal linkages and short-run dynamics between shadow economy and unemployment rate, ARDL cointegration approach is applied. Cointegration test results shows that in short-run both ILO and registered unemployment rate has a negative and statistically significant effect on the size of the shadow economy, while in the long-run the unemployment rates have a positive effect on shadow economy.The ARDL causality results revealed the existence of a long-run unidirectional causality that runs from unemployment rates (registered or ILO) to shadow economy. In addition, the CUSUM and CUSUMSQ tests confirm the stability of the both causal relationships.

Suggested Citation

  • Adriana AnaMaria DAVIDESCU, 2015. "The Relationship between Shadow Economy and Unemployment Rate. A Ardl Causality Analysis for the Case Of Romania," Romanian Statistical Review, Romanian Statistical Review, vol. 63(4), pages 46-62, December.
    • Handle: RePEc:rsr:journl:v:63:y:2015:i:4:p:46-62
    as

    Download full text from publisher

    File URL: http://www.revistadestatistica.ro/wp-content/uploads/2015/09/RRS4_2015_A4.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Friedrich Schneider & Robert Klinglmair, 2004. "Shadow economies around the world: what do we know?," Economics working papers 2004-03, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    3. Friedrich Schneider, 2003. "The Development of the Shadow Economies and Shadow Labour Force of 21 OECD and 22 Transition Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(01), pages 17-23, February.
    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. Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo.
    6. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    7. Constantin Anghelache & Radu Titus Marinescu & Emanuela Ionescu & Ligia Prodan & Alexandru Ursache, 2015. "Linear Regression Model," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 63(4), pages 48-52, April.
    8. Constantin ANGHELACHE & Madalina Gabriela ANGHEL & Ligia PRODAN & Cristina SACALA & Marius POPOVICI, 2014. "Multiple Linear Regression Model Used in Economic Analyses," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 62(10), pages 120-127, Octomber.
    9. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    10. Aniela Raluca Danciu & Vasile Alecsandru Strat, 2015. "Labor Force – Main Determinant Of the Foreign Direct Investments Located in Romania," Romanian Statistical Review, Romanian Statistical Review, vol. 63(1), pages 3-21, March.
    11. repec:ces:ifodic:v:1:y:2003:i:1:p:14567827 is not listed on IDEAS
    12. Lucian Liviu Albu & Ion Ghizdeanu & Cristian Stanica, 2011. "Spatial Distribution of the Informal Economy. A Theoretical and Empirical Investigation," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2011(1), pages 63-80.
    13. Salih Katircioglu, 2009. "Tourism, trade and growth: the case of Cyprus," Applied Economics, Taylor & Francis Journals, vol. 41(21), pages 2741-2750.
    14. Constantin ANGHELACHE & Madalina Gabriela ANGHEL & Cristina SACALA, 2014. "The Gross Domestic Product Evolution," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 62(12), pages 12-20, December.
    15. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-392, May.
    16. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    17. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    18. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
    19. Friedrich Schneider, 2003. "The Development of the Shadow Economies and Shadow Labour Force of 21 OECD and 22 Transition Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(1), pages 17-23, 02.
    20. 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.
    21. 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.
    22. Albu, Lucian Liviu & Iorgulescu, Raluca & Stanica, Cristian, 2010. "Estimating Hidden Economy and Hidden Migration: The Case of Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 46-56, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sefa Karagoz, 2020. "The Importance of the Informal Economy for Social Policy," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 70(2), pages 479-505, December.
    2. Rümeysa Çelik & Abdurrahman Keskin & Abdulkadir Keskin, 2021. "Türkiye’de Ekonomik Büyüme, İşsizlik ve Enflasyonun Kayıt Dışı İstihdam Üzerindeki Etkisi: ARDL Sınır Testi Yaklaşımı," Journal of Social Policy Conferences, Istanbul University, Faculty of Economics, vol. 0(80), pages 451-474, June.
    3. Atta Ullah & Chen Pinglu & Saif Ullah & Asif Ali Safeer & Shumaila Meer Perhiar, 2020. "Role of Corporate Social Responsibility in Sustaining Earning Value: Insights from an Emerging Country," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(11), pages 1280-1298, November.

    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. Gheorghe H. Popescu & Adriana Ana Maria Davidescu & Catalin Huidumac, 2018. "Researching the Main Causes of the Romanian Shadow Economy at the Micro and Macro Levels: Implications for Sustainable Development," Sustainability, MDPI, vol. 10(10), pages 1-37, September.
    2. 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.
    3. Kamila Fialová & Ondrej Schneider, 2014. "Labor Market Institutions and Their Impact on Shadow Economies in Europe," Review of Economics and Institutions, Università di Perugia, vol. 5(1).
    4. Kamila Fialová, 2010. "Labor Institutions and their Impact on Shadow Economies in Europe," Working Papers IES 2010/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2010.
    5. Dario Cziraky & Max Gillman, 2004. "Inflation and Endogenous Growth in Underground Economies," wiiw Balkan Observatory Working Papers 50, The Vienna Institute for International Economic Studies, wiiw.
    6. Adriana Anamaria Davidescu (Alexandru), 2014. "Investigating the Impact of Unemployment Rate on the Romanian Shadow Economy. A Complex Approach Based on ARDL and SVAR Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 109-127, December.
    7. 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.
    8. 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.
    9. Andreas Buehn & Alexander Karmann, 2011. "The Shadow Economy and Do-it-Yourself Activities: What Do We Know?," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 7, Edward Elgar Publishing.
    10. Ali, Amjad, 2022. "Determining Pakistan's Financial Dependency: The Role of Financial Globalization and Corruption," MPRA Paper 116097, University Library of Munich, Germany.
    11. Afonso, Oscar & Neves, Pedro Cunha & Pinto, Tiago, 2020. "The non-observed economy and economic growth: A meta-analysis," Economic Systems, Elsevier, vol. 44(1).
    12. Andreas Buehn & Friedrich Schneider, 2012. "Shadow economies around the world: novel insights, accepted knowledge, and new estimates," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 139-171, February.
    13. Hazans, Mihails, 2011. "What explains prevalence of informal employment in European countries : the role of labor institutions, governance, immigrants, and growth," Policy Research Working Paper Series 5917, The World Bank.
    14. Ahmed Gulzar & Novaira Junaid & Adnan Haider, 2010. "What is Hidden in the Hidden Economy of Pakistan? Size, Causes, Issues, and Implications," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(4), pages 665-704.
    15. Friedrich Schneider & Andreas Buehn & Claudio E. Montenegro, 2011. "Shadow Economies All Over the World: New Estimates for 162 Countries from 1999 to 2007," Chapters, in: Friedrich Schneider (ed.), Handbook on the Shadow Economy, chapter 1, Edward Elgar Publishing.
    16. Roberto Dell'Anno & Offiong Helen Solomon, 2008. "Shadow economy and unemployment rate in USA: is there a structural relationship? An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 40(19), pages 2537-2555.
    17. 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.
    18. Nezhyvenko, O., 2019. "Indirect or Macroeconomic Methods in Measuring the Informal Economy," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 8(4), pages 201-215, December.
    19. Goel, Rajeev K. & Saunoris, James W. & Schneider, Friedrich, 2019. "Drivers of the underground economy for over a century: A long term look for the United States," The Quarterly Review of Economics and Finance, Elsevier, vol. 71(C), pages 95-106.
    20. 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.

    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:rsr:journl:v:63:y:2015:i:4:p:46-62. 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: Adrian Visoiu (email available below). General contact details of provider: https://edirc.repec.org/data/stagvro.html .

    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.