EconPapers    
Economics at your fingertips  
 

The monetary method and the size of the shadow economy: A critical assessment

Hildegart Ahumada (), Facundo Alvaredo () and Alfredo Canavese

Post-Print from HAL

Abstract: A widely applied approach to measure the size of the shadow economy, known as the "monetary method" or the "currency approach," is based on econometric estimates of the demand for money. These estimates are used to get the currency held by economic agents in excess of the amount they need to finance registered transactions. This excess of currency multiplied by the income-velocity of circulation (assumed to be equal in the registered and shadow economies) gives a measure of the hidden GDP. This paper shows that the monetary method only produces coherent estimates if the income-elasticity of the demand for currency is one and suggests a way to correct the estimated size of the shadow economy when such elasticity is not one. The correction is applied to existent measures for different countries.

Date: 2007-06
References: Add references at CitEc
Citations: View citations in EconPapers (59)

Published in Review of Income and Wealth, 2007, 53 (2), pp.363-371. ⟨10.1111/j.1475-4991.2007.00234.x⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: THE MONETARY METHOD AND THE SIZE OF THE SHADOW ECONOMY: A CRITICAL ASSESSMENT (2007) Downloads
Working Paper: The monetary method and the size of the shadow economy: A critical assessment (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00812851

DOI: 10.1111/j.1475-4991.2007.00234.x

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2025-03-19
Handle: RePEc:hal:journl:hal-00812851