Estimating the Size of the Danish Shadow Economy using the Currency Demand Approach: An Attempt

1986 ◽  
Vol 88 (4) ◽  
pp. 643 ◽  
Author(s):  
Friedrich Schneider
Keyword(s):  
Shadow Economy ◽  
Currency Demand ◽  
Currency Demand Approach

scholarly journals The Shadow Economy of Czech Republic and Tax Evasion: The Currency Demand Approach

2016 ◽  
Vol 64 (6) ◽  
pp. 2081-2086 ◽  
Author(s):  
Dennis Nchor ◽  
Tomáš Konderla
Keyword(s):  
Czech Republic ◽  
Tax Evasion ◽  
Shadow Economy ◽  
Banking System ◽  
Tax Revenue ◽  
Velocity Of Money ◽  
Currency Demand ◽  
Currency Demand Approach ◽  
Automatic Teller Machines ◽  
Two Stages

This study investigates the shadow economy of Czech Republic and the associated losses in tax revenue. The presence of a shadow economy may not necessarily be bad for the economies in which they prevail but they could cause huge losses to government revenue and could also constitute serious violation of labour regulations. The study uses the Currency Demand Approach. It measures the size of the shadow economy in two stages: a) the econometric estimation of an aggregate money demand equation b) the calculation of the value of the shadow economy through the quantity theory of money. The key variables in the study include: the total currency held outside the banking system, the number of automatic teller machines, the deposit interest rate, GDP deflator, the average tax, velocity of money, nominal GDP and nominal money supply. The results from the study show that the shadow economy of Czech Republic on the average is about 20.9 % as at the end of 2013 and the country loses an average tax revenue of about 7.2 % of GDP yearly. The data was obtained from the World Bank country indicators and the International Financial Statistics.

Reply to Gebhard Kirchgässner

2017 ◽  
Vol 18 (1) ◽  
pp. 112-131 ◽  
Author(s):  
Lars P. Feld ◽  
Friedrich Schneider
Keyword(s):  
Potential Role ◽  
Shadow Economy ◽  
Survey Method ◽  
Double Counting ◽  
Advantages And Disadvantages ◽  
Currency Demand ◽  
Currency Demand Approach ◽  
Mimic Approach

Abstract In this reply to Kirchgässner, four issues are addressed: (1) the extent of double counting in attempts to reconcile estimates of the shadow economy based on the survey method and estimates based on the MIMIC (cum currency demand) approach, (2) advantages and disadvantages of the survey method, (3) of macro methods like the MIMIC approach and (4) the potential role of plausibility checks of estimates from the MIMIC approach with the survey method.

scholarly journals The Shadow Economy in Colombia: Size and Effects on Economic Growth

2014 ◽  
Vol 20 (2) ◽  
pp. 293-325 ◽  
Author(s):  
Friedrich Schneider ◽  
Bettina Hametner
Keyword(s):  
Economic Activity ◽  
Shadow Economy ◽  
Indirect Taxation ◽  
Average Growth ◽  
Percentage Points ◽  
Negative Effect ◽  
Currency Demand ◽  
Per Capita ◽  
Currency Demand Approach ◽  
Over Time

AbstractUsing the currency demand approach, size and development of Colombia’s shadow economy are estimated over the period from 1980 to 2012. The results show a great extent of shadow economic activity varying over time between 27 and 56% of GDP. The most important factors driving the shadow economy are indirect taxation and unemployment. Analyzing the interaction between shadow and official economy, the shadow economy has a negative effect on the official one. Average growth of real per capita GDP is 1.86% between 1980 and 2012, without shadow economy it would have been higher around 0.12 percentage points on average.

scholarly journals On Estimating the Size of the Shadow Economy

2017 ◽  
Vol 18 (1) ◽  
pp. 99-111 ◽  
Author(s):  
Gebhard Kirchgässner
Keyword(s):  
Shadow Economy ◽  
Survey Method ◽  
Currency Demand ◽  
Currency Demand Approach ◽  
Model Approach

Abstract As long as it is employed cautiously enough, the model approach is a useful tool to estimate simultaneously the size and the development of the shadow economy in several countries. However, a second method is necessary to calibrate the model. The currency demand approach can lead to highly implausible results; the size of the shadow economy might be largely overestimated. An alternative is the survey method. For real tests of whether a variable has an impact, procedures are necessary that do not use the same variables as those used to construct the indicator. Thus, to make progress in analysing the shadow economy, the model approach has a role to play, but it has to be complemented by other methods employing different data. The currency demand approach cannot be used as long as it employs the same variables for its constructions.

scholarly journals Currency demand and MIMIC models: towards a structured hybrid method of measuring the shadow economy

2018 ◽  
Vol 26 (1) ◽  
pp. 4-40 ◽  
Author(s):  
Piotr Dybka ◽  
Michał Kowalczuk ◽  
Bartosz Olesiński ◽  
Andrzej Torój ◽  
Marek Rozkrut
Keyword(s):  
Hybrid Method ◽  
Shadow Economy ◽  
Mimic Models ◽  
Currency Demand

scholarly journals SOME NEW ESTIMATES OF SHADOW ECONOMY FOR 80 COUNTRIES USING POOLED MEAN GROUP ESTIMATOR

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
Yan-Ling Tan ◽  
Muzafar Shah Habibullah ◽  
Shivee Ranjanee Kaliappan ◽  
Alias Radam
Keyword(s):  
Shadow Economy ◽  
Factor Model ◽  
Statistical Significance ◽  
Dynamic Factor ◽  
Pooled Mean Group ◽  
Macroeconomic Uncertainty ◽  
Long Run ◽  
Uncertainty Index ◽  
Short Run ◽  
Currency Demand

The purpose of this study is to estimates the size of the shadow economy for 80 countries from nine regions spanning the period 1975-2012 based on Tanzi-type currency demand approach (CDA). This study contributes to the literature in three distinct ways. First, we augment CDA regression with a macroeconomic uncertainty index (MUI). Second, the construction of the uncertainty index is based on the dynamic factor model (DFM). Third, the pooled mean group (PMG) estimator allows in capturing the heterogeneity across countries in the short-run dynamics but imposing restrictions in the long-run parameters. The results confirm the existence of the longrun equilibrium relationship among the variables examined. All coefficients show expected signs along with statistical significance. More importantly, the macroeconomic uncertainty index variable show positive relationship, suggesting that public tend to hold more currency in an uncertain macroeconomic environment. In addition, we observe that developing regions (ranging from 19.9% to 37.3%) exhibit relatively large size of the shadow economy. On the contrary, developed regions have a considerable smaller estimate (ranging from 13.7% to 19.0%) of the size of shadow economy. On average, the world estimate of the shadow economy as a percentage of GDP is about 23.1%. Keywords: Shadow Economy; Currency Demand; Macroeconomic Uncertainty; Pooled Mean Group.

scholarly journals Raising the Accuracy of Shadow Economy Measurements

2021 ◽  
Vol 239 (4) ◽  
pp. 71-125
Author(s):  
Vicente Ríos ◽  
◽  
Antonio Gómez ◽  
Pedro Pascual ◽  
◽  
...  
Keyword(s):  
Bayesian Model ◽  
Latent Variable ◽  
Bayesian Model Averaging ◽  
Shadow Economy ◽  
Electricity Consumption ◽  
Model Averaging ◽  
Hidden Sector ◽  
Multiple Indicators ◽  
Econometric Methods ◽  
Currency Demand

This article estimates the size of the shadow economy in a Spanish region (Navarre) for the period 1986- 2016. To this end, we employ indirect macro-econometric methods such as the Currency Demand approach, Electricity Consumption (Physical Input) methods and the multiple indicators multiple causes (MIMIC) approach. A differential feature of our empirical analysis is that we incorporate various methodological innovations (e..g. Bayesian Model Averaging, a Time-Varying Parameter model, normalization of the latent variable) to refine and increase the measurement accuracy of each of the indirect methods considered. The temporal pattern of the shadow economy’s size that emerges from the different approaches is similar, which suggests that the estimates obtained are robust and capture the underlying dynamics of the hidden sector. After quantifying the shadow economy, we analyze its determinants by means of Bayesian Model Averaging techniques. We find that the evolution of the shadow economy in Navarre can be explained by a small and robust set of factors, specifically the tax burden, the share of employment in the construction sector, the inflation rate, euro area membership and the ratio of currency outside the banks to M1.

The Comparison of the Shadow Economy in Turkey and European Countries

2016 ◽  
pp. 73-105 ◽  
Author(s):  
Coskun Karaca
Keyword(s):  
Informal Economy ◽  
Shadow Economy ◽  
Reliable Data ◽  
European Countries ◽  
Measuring Methods ◽  
Currency Demand ◽  
Policy Proposals

As informal activities are considered as a crime, that kind of activities are being carried out secretly and their detection is difficult in most cases. Along with difficulties in determining the size of informal economy exactly, recently developed models and opportunities to reach reliable data enable making realistic estimations in regard to shadow economy. This study benefits from 11 different studies estimating informality in European countries and Turkey by using physical input, currency demand, DYMIMIC, and MIMIC methods. Common conclusion acquired from these studies is that informality rate in Turkey is higher than EU15 countries and EU13 countries –except for Hungary, Cyprus, Latvia, Croatia and Bulgaria. In addition to the comparison of these data, the reasons of the emergence of informal economy, measuring methods, and policy proposals in order to hamper informality in Turkey are also discussed.

Intensity of Regulations as a Cause of the Informal Sector

2020 ◽  
Vol 15 (2) ◽  
pp. 135-154
Author(s):  
Khurrum S. Mughal ◽  
Friedrich G. Schneider ◽  
Zafar Hayat
Keyword(s):  
Informal Sector ◽  
Informal Economy ◽  
Shadow Economy ◽  
Control Variable ◽  
Government Control ◽  
Yearly Variation ◽  
New Variant ◽  
History Of ◽  
Currency Demand ◽  
And Control

It is argued in the literature that the intensity of regulations and control in an economy is a determinant of the informal sector which however is ignored in most of its estimates. This article uses a new variant of the currency demand approach where ‘unemployment’ and ‘intensity of government control’ are used to estimate a shadow economy, alongside a the traditional tax variable. We choose Pakistan since it has a significant share of its activities in the informal sector along with the history of various political and dictatorial regimes. Further, there are examples of bureaucratic control leading to corruption in the economy. It provides an opportunity to study the nexus between regulation intensity and informal economy and present a case study for other developing countries exercising control over the economy through the large size of its public sector. The results show that the intensity of the control variable has statistically and economically significant role in increasing the shadow economy, almost equivalent to the tax coefficient. Once the yearly variation in our estimates is mapped with various political regimes, it seems that the validity of estimates is reinforced considering policy inconsistencies and prominent events of each regime.

Sign in / Sign up

Export Citation Format

Share Document