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Revealing Australia’s underground economy

Harb, Diab and Bhattacharya, Prasad S. 2008, Revealing Australia’s underground economy, Deakin University, School of Accounting, Economics and Finance, Geelong, Vic..

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Title Revealing Australia’s underground economy
Author(s) Harb, Diab
Bhattacharya, Prasad S.
Publication date 2008-10-14
Series School Working Paper - Economics Series ; SWP 2008/05
Total pages 32
Publisher Deakin University, School of Accounting, Economics and Finance
Place of publication Geelong, Vic.
Keyword(s) E26
Underground Economy
Currency Demand Model
Cash and Currencies
Money Supply
Welfare Payments
Velocity of Currency.
Summary This study, using currency demand model, finds Australia’s underground economy to be around 2 to 3 per cent of gross domestic product. We extend the related literature (see, inter alia, Bajada, 1999 and Breusch, 2005) in three novel ways. First, we use Austrian levels of taxes and welfare payments as the minimum levels of taxes and welfare payments. Secondly, we employ the currency demand measurement as in Cagan (1958), i.e., cash and currencies as a proportion of total money supply. Third, we use Cagan’s original assumption regarding equalities of velocities of currencies in both the legal and illegal economies in order to estimate the underground economy.
Language eng
HERDC Research category CN.1 Other journal article
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Document type: Report
Collections: Faculty of Business and Law
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