The Size and Development of the Shadow Economy in Morocco

Kamal Lahlou, Hicham Doghmi and Friedrich Schneider ()
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Hicham Doghmi: Bank Al-Maghrib, Département de la Recherche

No 2020-3, Document de travail from Bank Al-Maghrib, Département de la Recherche

Abstract: The objective of this paper is to estimate the size of the shadow economy in Morocco over the period 1988-2018. The CDA and MIMIC approaches are used while taking into consideration variables that reflect the features of the Moroccan economy such as the importance of currency in circulation, the size of the agricultural sector and the financial development process. Our results show that the evolution of the shadow economy exhibits three distinct periods: (i) over the first period 1988-1998, it is almost stagnant at around 40% of GDP; (ii) during the second period 1999-2008, it decreases to 32% -34% of GDP; (iii) during the last period 2009-2018, the declining trend is continuing but at a more moderate pace, to reach a level just below 30% of GDP. These results suggest that the strategies implemented by national authorities since the early 2000s to improve the institutional, economic and financial environment contributed to reducing the size of the shadow economy. However, the persistence of important shadow activities requires additional structural reforms particularly those related to education, judiciary system, tax policy and labor market.

Keywords: Shadow economy; MIMIC model; currency demand approach; financial development; structural reforms; Morocco (search for similar items in EconPapers)
JEL-codes: C22 E26 H26 K42 O17 P11 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2020-12-30
New Economics Papers: this item is included in nep-ara, nep-fdg, nep-iue, nep-law and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:bkamdt:2020_003

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