The Size of Informal Economy in Pakistan

Muhammad Arby (), Muhammad Jahanzeb Malik () and Muhammad Hanif

No 33, SBP Working Paper Series from State Bank of Pakistan, Research Department

Abstract: This paper estimates the size of informal economy in Pakistan by using monetary approach with some modifications, electricity consumption approach and MIMIC model. Under monetary approach, we take care of the issue of the stationarity of variables and use autoregressive distributed lag (ARDL) model instead of simple OLS and add education as an additional factor affecting the size of informal economy along with some other technical improvements in the standard monetary models. The electricity consumption approach and MIMIC models are used for the first time in case of Pakistan. The results show that the informal economy in Pakistan has been about 30 percent of the total economy which declined considerably in 2000s. Currently, about 20 percent of the economic transactions are taking place in the informal sector. Length: 22 pages

Keywords: Informal economy; ARDL; MIMIC (search for similar items in EconPapers)
JEL-codes: C10 E26 (search for similar items in EconPapers)
Date: 2010-05
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Citations: View citations in EconPapers (15)

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Related works:
Working Paper: The Size of Informal Economy in Pakistan (2010)
Working Paper: The size of informal economy in Pakistan (2010)
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