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Revealing Australia’s underground economy

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posted on 2008-10-14, 00:00 authored by D Harb, Prasad BhattacharyaPrasad Bhattacharya
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.

History

Pagination

1-32

Language

eng

Publication classification

CN.1 Other journal article

Publisher

Deakin University, School of Accounting, Economics and Finance

Place of publication

Geelong, Vic.

Series

School Working Paper - Economics Series ; SWP 2008/05

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