IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Currency Demand Modeling In Estimating The Underground Economy: A Critique on ‘Excess Sensitivity’ Method and Support for VAR Framework

  • Jerry Marmen Simanjuntak

    ()

    (College of Business and Economics The Australian National University, Australia & ABFI Institute PERBANAS, Jakarta, Indonesia)

Registered author(s):

    The ‘excess sensitivity’ as the method of estimating the underground economy by using currency modeling is found to be unreliable. In general, there are two major weaknesses in the method. First, the key assumption, in assuming the equality of velocity of money between the official economy and the underground economy, is very unrealistic. Second, the method is found to be non robust due to the unit measurement and scale change. More specifically, the application of the excess sensitivity method using the single-step error correction model (ECM) in Bajada’s paper is very weak because there is no cointegration analysis as the prerequisite of ECM modeling. In conclusion, the possibility of using a currency demand approach in estimating the size of the underground economy is still unclear like ‘black box’, and in particular, the excess sensitivity method should be thoroughly revised.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://lp3e.fe.unpad.ac.id/wopeds/200806.pdf
    File Function: First version, 2008
    Download Restriction: no

    Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 200806.

    as
    in new window

    Length: 48 pages
    Date of creation: Sep 2008
    Date of revision: Sep 2008
    Handle: RePEc:unp:wpaper:200806
    Contact details of provider: Postal: Jalan Cimandiri No.6, Bandung 40115
    Phone: (062)022-4204510
    Fax: (062)022-4204510
    Web page: http://ceds.fe.unpad.ac.idEmail:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Mariá Dolores Gadea & José Mariá Serrano-Sanz, 2002. "The hidden economy in Spain - A monetary estimation, 1964-1998," Empirical Economics, Springer, vol. 27(3), pages 499-527.
    2. Vito Tanzi, 1986. "The Underground Economy in the United States: Reply to Comments by Feige, Thomas, and Zilberfarb," IMF Staff Papers, Palgrave Macmillan, vol. 33(4), pages 799-811, December.
    3. Bajada, Christopher, 1999. "Estimates of the Underground Economy in Australia," The Economic Record, The Economic Society of Australia, vol. 75(231), pages 369-84, December.
    4. David E. A. Giles, 1999. "Modelling the hidden economy and the tax-gap in New Zealand," Empirical Economics, Springer, vol. 24(4), pages 621-640.
    5. David Giles, 1997. "Causality between the measured and underground economies in New Zealand," Applied Economics Letters, Taylor & Francis Journals, vol. 4(1), pages 63-67.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:unp:wpaper:200806. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Arief Anshory Yusuf)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.