EVALUATING THE RELATIONSHIP BETWEEN OFFICIAL ECONOMY AND SHADOW ECONOMY IN ROMANIA. A STRUCTURAL VECTOR AUTOREGRESSIVE APPROACH

Adriana AnaMaria Davidescu ()
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Adriana AnaMaria Davidescu: Department of Statistics and Econometrics, Bucharest University of Economic Studies

Journal of Social and Economic Statistics, 2014, vol. 3, issue 2, 57 - 65

Abstract: Official economic situation plays a crucial role in people's decision to work or not in the informal sector. In a booming official economy, people have a lot of opportunities to earn a good salary and even extra money. This is not the case of an economy in recession, when people try to compensate the loss of income from formal economy through involvement in the informal economy. The paper aims to evaluate the relationship between official economy and shadow economy for the case of Romania using quarterly data covering the period 20000Q1-2013Q4.In order to do that, a structural vector autoregressive approach(SVAR) was used. The relationship between the two variables is tested by imposing a long-run restriction in the Structural VAR model to analyze the effect in the size of Romanian shadow economy to a temporary shock in real GDP. The impulse response function generated by the Structural VAR confirms that in the short-run, a rise in the official economy will lead to a decrease in the size of the shadow economy.

Keywords: shadow economy; real GDP index; MIMIC model; Structural VAR; Romania (search for similar items in EconPapers)
JEL-codes: C51 E26 H20 H50 O17 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:aes:jsesro:v:3:y:2014:i:2:p:57-65

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