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Is Cash Used Only in the Shadow Economy?

Author

Listed:
  • Kari Takala
  • Matti Viren

Abstract

This paper analyzes the use of cash in the Euro area. It attempts to give at least a partial answer to the question of whether cash is predominantly used in the shadow economy and whether, consequently, the behavior of cash balances is useful in monitoring changes in the shadow economy. The paper shows that - contrary to what is often assumed - recent developments in cash demand (including changes in denomination structure) can be fairly well explained by certain economic and institutional factors. Changes in cash demand do not seem to correspond to changes in existing measures of the shadow economy, nor do cross-country comparisons reveal close correspondence.

Suggested Citation

  • Kari Takala & Matti Viren, 2010. "Is Cash Used Only in the Shadow Economy?," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 525-540.
  • Handle: RePEc:taf:intecj:v:24:y:2010:i:4:p:525-540
    DOI: 10.1080/10168737.2010.525992
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    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. 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.
    3. Buehn, Andreas & Schneider, Friedrich, 2009. "Corruption and the Shadow Economy: A Structural Equation Model Approach," IZA Discussion Papers 4182, Institute of Labor Economics (IZA).
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    Citations

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    Cited by:

    1. Rajeev K. Goel & Aaron N. Mehrotra, 2012. "Financial payment instruments and corruption," Applied Financial Economics, Taylor & Francis Journals, vol. 22(11), pages 877-886, June.
    2. Hans-Georg Petersen & Ulrich Thiessen, 2010. "Editors' Introduction: Shadow Economy in High Income Countries - Much Ado about Nothing?," International Economic Journal, Taylor & Francis Journals, vol. 24(4), pages 413-419.
    3. Gebhard Kirchgässner, 2017. "On Estimating the Size of the Shadow Economy," German Economic Review, Verein für Socialpolitik, vol. 18(1), pages 99-111, February.
    4. Dimitrios Psychoyios & Olympia Missiou & Theologos Dergiades, 2019. "Energy based estimation of the Shadow Economy: The role of Governance Quality," Discussion Paper Series 2019_07, Department of Economics, University of Macedonia, revised Nov 2019.
    5. John Cullis & Bruce Morley, 2017. "A methodology for determining the ‘cash economy’ in the European Union via an announcement effect," European Journal of Law and Economics, Springer, vol. 44(1), pages 113-129, August.
    6. Franz Seitz & Hans-Eggert Reimers & Friedrich Schneider, 2018. "Cash in Circulation and the Shadow Economy: An Empirical Investigation for Euro Area Countries and Beyond," CESifo Working Paper Series 7143, CESifo.
    7. Matti Viren, 2015. "Why so little revenues are obtained from a presumed large shadow economy?," Economics of Governance, Springer, vol. 16(2), pages 101-123, May.

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