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Shadow Economy in Sri Lanka: A Review and New Estimates

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  • K K C Sineth Kannangara

    (Business School, The University of Western Australia and Central Bank of Sri Lanka)

  • Yanrui Wu

    (Business School, The University of Western Australia)

Abstract

Using a country-specific data set to reflect employment in the official sector, the dynamic general equilibrium modelling results in this paper demonstrate that Sri Lanka's shadow economy has not behaved in line with the general literature finding of a shrinking shadow economy over time. Since 2012, especially, Sri Lanka has been experiencing a rapid surge in its shadow economy, which now accounts for about half of its publicly reported GDP. Therefore, this paper emphasises the significance of paying due attention to the performance of the economy and how to minimise the further worsening of the ability of the economy to receive expected outcomes of the policies implemented.

Suggested Citation

  • K K C Sineth Kannangara & Yanrui Wu, 2023. "Shadow Economy in Sri Lanka: A Review and New Estimates," Economics Discussion / Working Papers 23-04, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:23-04
    Note: MD5 = 2d45ca15edd8760e05a83dad39932ffa
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    References listed on IDEAS

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