This paper explores the ability of a class of two-sector dynamic general equilibrium models to generate equilibrium time series for Money Laundering (ML), through numerical simulations in accordance with the works of Ingram, Kocherlakota and Savin (1997), Busato, Chiarini and Di Maro (2006), and Argentiero, Bagella and Busato (2008). The paper adopts this approach for the US and the EU-15 economies. The simulations show that ML accounts for 19 percent of GDP in the EU-15 economy, while it accounts for 13 percent in the US economy over the sample 2000:01-2007:04. Moreover, the ML simulated for the EU-15 is less volatile (relative standard deviation to GDP is 0.288 compared to a figure of almost 0.4 for the US economy), and negatively correlated with respect to GDP. The latter statistic is positive for the US economy.
This paper implements a methodology that exploits firms and households' optimality conditions to measure money laundering for the Italian economy. This approach, first implemented by Ingram et al. (J Monet Econ 40:435-436, 1997) to the household production sector, and by Busato et al. (Using theory for measurement: an analysis of the behaviour of underground economy working paper, Aarhus University, 2006) for measuring the underground economy, allows to generate high frequency time-series for money laundering using a theoretical two-sector dynamic general equilibrium model calibrated over the sample 1981:01-2001:04. The analysis of the generated series suggests two main results. First, money laundering accounts for approximately 12 percent of aggregate GDP; second, money laundering is more volatile than aggregate GDP and it is negatively correlated with it
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