scholarly journals An Empirical Estimation of the Underground Economy in Ghana

2014 ◽  
Vol 2014 ◽  
pp. 1-14 ◽  
Author(s):  
Edward Asiedu ◽  
Thanasis Stengos
Keyword(s):  
Lower Bound ◽  
Underground Economy ◽  
Parameter Estimates ◽  
Empirical Estimation ◽  
Demand Equation ◽  
Long Run ◽  
Currency Demand ◽  
Currency Demand Approach ◽  
Average Size

The main aim of this paper is to estimate the size of the underground economy in Ghana during the period 1983–2003. There is no agreement on the appropriate estimation approach to adopt to measure the size of the underground activities. To this end, we employ the well-applied currency demand approach in our measurement. Parameter estimates from the estimated currency demand equation are used in quantifying the ratio of “underground” to “measured” output/income for the Ghanaian economy. The estimated long-run average size of the underground economy to GDP for Ghana over the period is 40%. The underground economy is found to vary from a high of 54% in 1985 to a low of 25% in 1999. Estimates may represent lower bound estimates.

Currency demand stability in the presence of seasonality and endogenous financial innovation

2017 ◽  
Vol 9 (02) ◽  
pp. 122-139 ◽  
Author(s):  
Sunny Kumar Singh
Keyword(s):  
Demand Function ◽  
Financial Innovation ◽  
Significant Implication ◽  
Demand Equation ◽  
Deposit Rate ◽  
Content Type ◽  
Explanatory Variables ◽  
Long Run ◽  
Currency Demand ◽  
The Stability

Purpose This paper aims to examine the stability of the currency demand function for India with private consumption expenditure, tax–gross domestic product ratio and deposit rate as explanatory variables for the period 1996:1 to 2014:4. Additionally, this paper also tries to detect the presence of endogenous financial innovation in the currency demand function. Design/methodology/approach For the theoretical foundation of the study, this paper has used a modified version of money-in-the-utility function. To examine the stability of currency demand function empirically, seasonal cointegration technique developed by HEGY (1990) and EGHL (1993) was applied. Finally, to detect the presence of endogenous financial innovation in the currency demand equation, the Gurley and Shaw (1960) hypothesis was tested by presenting the currency demand equation in a state–space form. Findings The empirical findings show that there is the absence of long-run cointegrationg relationship among the variables at the zero and annual frequency; however, there is evidence of a relationship among the variables at the biannual frequency. Moreover, the time-varying coefficient of deposit rate elasticity, used to test the Gurley–Shaw hypothesis, suggests that innovations in financial markets, especially improvements in the payment technology, raise the deposit-rate elasticity, beginning from 2010 onward. Practical implications The empirical results of the paper suggest that there would be shrinkage of currency demand in future. From the monetary policy angle, the Reserve Bank of India needs to adapt adequately to a situation of shrinking demand for currency. Originality/value Apart from using seasonally unadjusted data to examine currency demand function for India, this study, for the first time, and to the best of the authors’ knowledge, tries to test the evidence of financial innovation in India by testing the Gurley–Shaw hypothesis. The findings of the study will have significant implication in the planning of the issue and distribution of currency in the fast-changing economic environment.

Measuring the Underground Economy and its Impact on the Economy of Pakistan

2004 ◽  
Vol 9 (2) ◽  
pp. 93-103 ◽  
Author(s):  
Bushra Yasmin ◽  
Hira Rauf
Keyword(s):  
Tax Evasion ◽  
Underground Economy ◽  
Least Square ◽  
Demand Equation ◽  
Ordinary Least Square ◽  
Economic Problems ◽  
Time Period ◽  
Monetary Approach ◽  
Currency Demand ◽  
The Impact

This study focuses on the measurement of the underground economy (UGE) through tax evasion in Pakistan over the time period 1974-2002. The monetary approach is applied in order to estimate the underground economy. First, the currency demand equation is estimated and then an attempt is made to deduce the size of the underground economy and tax evasion. Finally, an Ordinary Least Square (OLS) Model is applied in order to estimate the impact of the underground economy on Gross Domestic Product of Pakistan for a selected time period. The results demonstrated that the underground economy has increased enormously from Rs. 12 billion in 1974 to Rs. 1085 billion in 2002. The findings suggest that the existence of such a large UGE can decrease tax revenues, depress GDP, and raise socio-economic problems. Frequent tax audits and heavier penalties for tax evasion may minimise the size of the underground economy with its ill effects.

scholarly journals Measurement of the Underground Economy in Nepal: A Currency Demand Approach

2016 ◽  
pp. 105-127 ◽  
Author(s):  
Nirmal Kumar Raut ◽  
Namuna Chalise ◽  
Puja Thapa
Keyword(s):  
Armed Conflict ◽  
Indirect Method ◽  
Developing Economies ◽  
Underground Economy ◽  
Institutional Arrangements ◽  
Financial Crimes ◽  
Currency Demand ◽  
Currency Demand Approach

There have been rising concerns on growing magnitude of Underground Economy in most of the economies irrespective of their state of development. The problem is more apparent in developing economies where legal and institutional arrangements are relatively weaker. This study attempts to estimate empirically the size of Underground Economy in Nepal. We use an indirect method of customized version of Currency Demand Method to measure the same and find that its coverage has been increasing throughout in the last two decades with the most alarming increment in the last two fiscal years 2011and 2012. We attribute these increments particularly to the 1996-2006 armed conflict; the increasing cases of economic and financial crimes; and a large informal sector.Economic Journal of Development Issues Vol. 17 & 18 No. 1-2 (2014) Combined Issue, Page: 105-127

Enhancing Economic Growth and Government Revenue Generation in Nigeria: The Role of Diaspora Remittances

2021 ◽  
pp. 003464462110256
Author(s):  
Dal Didia ◽  
Suleiman Tahir
Keyword(s):  
Economic Growth ◽  
Parameter Estimates ◽  
Gross Domestic Product Growth ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
The Empirical Analysis

Even though remittances constitute the second-largest source of foreign exchange for Nigeria, with a $24 billion inflow in 2018, its impact on economic growth remains unclear. This study, therefore, examined the short-run and long-run impact of remittances on the economic growth of Nigeria using the vector error correction model. Utilizing World Bank data covering 1990–2018, the empirical analysis revealed that remittances hurt economic growth in the short run while having no impact on economic growth in the long run. Our parameter estimates indicate that a 1% increase in remittances would result in a 0.9% decrease in the gross domestic product growth rate in the short run. One policy implication of this study is that Nigeria needs to devise policies and interventions that minimize the emigration of skilled professionals rather than depending on remittances that do not offset the losses to the economy due to brain drain.

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 The Impact of Financial Innovation on the Money Demand Function: An Empirical Verification in India

2020 ◽  
Vol 14 (1) ◽  
pp. 28-61 ◽  
Author(s):  
Masudul Hasan Adil ◽  
Neeraj Hatekar ◽  
Pravakar Sahoo
Keyword(s):  
Money Demand ◽  
Demand Function ◽  
Financial Innovation ◽  
Jel Classification ◽  
Parameter Estimates ◽  
Correlated Errors ◽  
Bounds Testing ◽  
Money Demand Function ◽  
Long Run ◽  
The Impact

Traditional money demand functions are often criticized for persistent over-prediction, implausible parameter estimates, highly serially correlated errors and unstable money demand. This study argues that some of these problems may have emerged for the lack of factoring financial innovation into the money demand function. This study estimates money demand for India during the post-reform period, from 1996:Q2 to 2016:Q3. The money demand function is estimated with the linear ARDL approach to cointegration developed by Pesaran, Shin, & Smith (2001), Bounds testing approaches to the analysis of level relationships, Journal of Applied Econometrics, 16(3), 289–326, after employing various proxies for financial innovation. In conclusion, the study finds that there is a stable long-run relationship among variables, such as real money balances, and the scale and opportunity cost variables. In a nutshell, the study assesses the relative importance of financial innovation variables in the money demand equation, and finds that financial innovation plays a very significant role in the money demand specification and its stability. JEL Classification: E41, E44, E42, E52, O16, O53

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