Economic (In)Stability Under Monetary Targeting

We contribute to the debate on how to assess the size of the underground (or shadow) economy by proposing a reinterpretation of the traditional Currency Demand Approach (CDA) à la Tanzi. In particular, we introduce three main innovations. First, we take a direct measure of the value of cash transactions -the flow of cash withdrawn from bank accounts relative to total noncash payments -as the dependent variable in the money demand equation. This allows us to avoid unrealistic assumptions on the velocity of money and the absence of any irregular transaction in a given year, overcoming two severe critiques to the traditional CDA. Second, in place of the tax burden level, usually intended as the main motivation for non-compliance, we include among the covariates two direct indicators of detected tax evasion. Finally, we control also for the role of illegal production considering crimes like drug dealing and prostitution, which -jointly with the shadow economy -contributes to the larger aggregate of the non-observed economy and represents a significant component of total cash payments. We propose then an application of this 'modified CDA' to a panel of 91 Italian provinces for the years 2005-2008.

show abstract

Corporate Geography in Multi-Plant Firms

Cappariello

Federico

Zizza

2012

SSRN Journal

View full text Add to dashboard Cite

scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.

Contact Info

customersupport@researchsolutions.com

10624 S. Eastern Ave., Ste. A-614

Henderson, NV 89052, USA

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Blog Terms and Conditions API Terms Privacy Policy Contact Cookie Preferences Do Not Sell or Share My Personal Information

Made with 💙 for researchers

Part of the Research Solutions Family.

Economic (In)Stability Under Monetary Targeting

Cited by 19 publications

References 121 publications

House Price Cycles in Emerging Economies

House Price Cycles in Emerging Economies

Measuring the Underground Economy with the Currency Demand Approach: A Reinterpretation of the Methodology, with an Application to Italy

Corporate Geography in Multi-Plant Firms

Contact Info

Product

Resources

About