The Underground Economy: Estimation, and Economic and Policy Implications: The Case of Pakistan

Ghiath Shabsigh

No 1995/101, IMF Working Papers from International Monetary Fund

Abstract: This paper estimates the size of the underground economy in Pakistan and analyzes its impact on Government fiscal position and the allocation of economic resources in the national economy. The results suggest that there is a mutual dependency between the size of the underground economy and fiscal deficits, and show a leakage from the national income-expenditure cycle in the formal economy to the underground economy via private investments. Finally, the paper proposes long- and short-run policies to reduce the size of the underground economy.

Keywords: WP; GDP deflator; deficit-UE cycle; integration equation; formal GDP; D ratio; import UEA; currency demand; causality equation; Private investment; Budget planning and preparation; Currencies; Income; Government debt management (search for similar items in EconPapers)
Pages: 23
Date: 1995-10-01
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Citations: View citations in EconPapers (21)

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