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Measuring the size of the hidden economy in Trinidad & Tobago, 1973-1999


  • Alain Maurin
  • Sandra Sookram
  • Patrick Kent Watson


In this paper, an attempt is made to measure the hidden economy of Trinidad & Tobago over the period 1973-1999, within the Structural Cointegrating VAR (SCVAR) framework. Using a Tanzi-type currency demand approach as a starting point, a multiple equation SCVAR model is estimated that contains two long-run relationships linking the demand for currency with other variables. The model is evaluated on the basis of its persistence profiles, its impulse responses and other statistical criteria. It is solved using a Gauss-Siedel algorithm and is used to establish that the size of the hidden economy rose from a low of about 14% of measured GDP in the early 1970s to a high of 36% in 1981, and is currently about 20% of measured GDP. Hidden economic activity is also found to be highly positively correlated with activity in the regular economy.

Suggested Citation

  • Alain Maurin & Sandra Sookram & Patrick Kent Watson, 2006. "Measuring the size of the hidden economy in Trinidad & Tobago, 1973-1999," International Economic Journal, Taylor & Francis Journals, vol. 20(3), pages 321-341.
  • Handle: RePEc:taf:intecj:v:20:y:2006:i:3:p:321-341 DOI: 10.1080/10168730600879406

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    References listed on IDEAS

    1. Anthony Garratt & Kevin Lee & M. Hashem Pesaran & Yongcheol Shin, 2003. "A Long run structural macroeconometric model of the UK," Economic Journal, Royal Economic Society, vol. 113(487), pages 412-455, April.
    2. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    3. Anthony Garratt & Kevin Lee & Mohammad Hashem Pesaran & Yongcheol Shin, 1998. "A structural cointegrating VAR approach to macroeconometric modelling," ESE Discussion Papers 8, Edinburgh School of Economics, University of Edinburgh.
    4. Pesaran, M. Hashem & Shin, Yongcheol, 1996. "Cointegration and speed of convergence to equilibrium," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 117-143.
    5. Ebrima A Faal, 2003. "Currency Demand, the Underground Economy, and, Tax Evasion—The Case of Guyana," IMF Working Papers 03/7, International Monetary Fund.
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    Cited by:

    1. Imamoglu, Hatice, 2017. "Estimating the roles of financial sector development and international trade openness in underground economies: Evidence from the European Union," Economics Discussion Papers 2017-50, Kiel Institute for the World Economy (IfW).


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