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Un modelo Mundell-Fleming con economía ilegal y lavado de dinero
[Modeling illegal economy and money laundering: a Mundell-Fleming framework]

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  • Slim, Sadri

Abstract

The purpose of this paper is to present an extended version of the Mundell-Fleming model which allows a macroeconomic analysis of the effects stemming from illegal economy with money laundering on the short-term equilibrium for a small open economy. Without disregarding the FATF´s money laundering typology, we propose to differentiate the money laundering activities by the degree of crime organization, i.e. differentiating between individual, national as well as transnational crimes. According to the previous taxonomy, we postulate four channels of money laundering that enable the reintegration of illegal money, through consumption, investment, international trade and capital movements. In this context, it is shown that the multiplier effect triggered by illegal economic activities is always negative on formal GDP. However, the effect on the interest rate is subtler and depends on the structure of the given economy, which could lead to an appreciation or depreciation of the exchange rate related to the degree of capital mobility.

Suggested Citation

  • Slim, Sadri, 2015. "Un modelo Mundell-Fleming con economía ilegal y lavado de dinero [Modeling illegal economy and money laundering: a Mundell-Fleming framework]," MPRA Paper 64675, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:64675
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    References listed on IDEAS

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    More about this item

    Keywords

    Illegal Economy; Money Laundering; Mundell-Fleming; Flexible Exchange Rate; Multiplier; Money Demand; Liquidity Preference;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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