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The Underground Economy And The Currency Enigma

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  • Edgar L. Feige

    (University of Wisconsin-Madison)

Abstract

The size, growth and causes of the US “underground economy” are examined in light of new estimates of foreign holdings of US currency. World dollarization partially resolves the “currency enigma” which refers to the anomaly that roughly 80% of the US currency supply is “missing” and an estimated ten trillion dollars of cash payments can not be accounted for. US currency that is used overseas suggests that there is a world wide unrecorded economy that could rival the size of the US economy. Large and variable overseas holdings of US currency imply that monetary aggregates must be redefined to include only domestically held currency. The paper defines and estimates the size of the ‘domestic money supply”. Reference: Proceedings of the 49th Congress of the International Institute of Public Finance, Berlin 1993, Supplement to Public Finance Vol. 49 (1994) pp.119-136.

Suggested Citation

  • Edgar L. Feige, 2005. "The Underground Economy And The Currency Enigma," Macroeconomics 0502004, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0502004
    Note: Type of Document - pdf; pages: 18
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    Keywords

    underground economy; dollarization; currency; money supply; monetary base; unreported income; unrecorded income.;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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