Estimation of the Black Economy of Pakistan through the Monetary
      Approach

Ahmed, Mehnaz; Ahmed, Qazi Masood

doi:10.30541/v34i4iipp.791-807

Cited by 24 publications

(21 citation statements)

References 4 publications

(1 reference statement)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Ahmed and Hussain (2008) made a comprehensive exercise to obtain the latest estimates for the size of the informal economy in Pakistan for the period 1960-03 by taking into account the tax and tariff reforms of 1990s. Based on the methodology of Ahmed and Ahmed (1995) with slight modifications, they came up with the conclusion that the black economy has a declining trend as a percentage of GDP due to the tax reforms involving rationalization of tax rates. Moreover, the inclusion of bearers bond in the model also increases the size of the black economy.…”

Section: Review Of Relevant Literaturementioning

confidence: 99%

“…He concluded that the size of the black economy was 21% of the total GDP in 1975 and declined slightly to 20.4% in 1990, thus implying a torpid underground economy. Ahmed and Ahmed (1995) adopted the monetary analysis to estimate the size of the black economy using data for the period 1960-90 through Tanzi's approach. The inclusion of bearer bonds along with currency in circulation revealed that the level of tax evasion has increased over the number of years but the black economy as a percentage of GDP registered a decline in Pakistan.…”

Section: Review Of Relevant Literaturementioning

confidence: 99%

See 1 more Smart Citation

What is Hidden, in the Hidden Economy of Pakistan? Size, Causes, Issues, and Implications

Gulzar¹,

Junaid²,

Haider³

2022

pdr

View full text Add to dashboard Cite

There is a worldwide contemporary debate about the role of the hidden economy in achieving the goal of sustained and inclusive economic growth and development, especially in the context of its spillover effects on the formal economy. For this purpose, policy makers and academicians have made concerted efforts to estimate the size of the hidden economy and to analyze its causes, issues and implications on key macroeconomic variables. However, there is a consensus among the policy makers that a better macroeconomic policy formulation and its true implementation are subject to the proper management of the associated issues of the hidden economy with suitable policy measures. In Pakistan, it is generally assumed that the hidden economy contributes about 30% to 50% to the overall GDP. The purpose of this paper is to estimate more precisely the size of the hidden economy with the determination of its potential causes and implications. Five statistical and structural modeling approaches namely; simple monetary approach, modified monetary approach using dynamic ordinary least square (DOLS), multiple-indicators multiple-causes (MIMIC) approach, electricity consumption approach and labor market survey based approach are used to estimate the size of the hidden economy and to analyze the characteristic nature of its growth over the period. The study also investigates the potential determinants of the hidden economy and various interrelated socio-economic issues in perspective of achieving national goal of inclusive growth and development. Finally, policy implications are provided consistent with pervading facts of the hidden economy in Pakistan especially in the context of the 18 th Amendment and the 7 th NFC Award.JEL Classifications: C10, E26, D78, H20, H50, O53

show abstract

Section: Review Of Relevant Literaturementioning

confidence: 99%

Section: Review Of Relevant Literaturementioning

confidence: 99%

What is Hidden, in the Hidden Economy of Pakistan? Size, Causes, Issues, and Implications

Gulzar¹,

Junaid²,

Haider³

2022

pdr

View full text Add to dashboard Cite

show abstract

“…Past estimates assume tax as the only determinant, except the study by Arby et al (2010) which included the unemployment rate in its CD equation. Further, most of the estimates for Pakistan, for example, Ahmed and Ahmed (1995), Shabsigh (1995), Aslam (1998), Iqbal et al (1998), Kemal (2003), Yasmin and Rauf (2003), and Ahmed and Haider (2008) did not account for cointegration. OLS estimates without accounting for stationarity and cointegration are not consistent and are mostly from the time when the use of error correction models was not a common practice.…”

Section: Introductionmentioning

confidence: 98%

Intensity of Regulations as a Cause of the Informal Sector

Mughal

Schneider

Hayat³

2020

Journal of South Asian Development

View full text Add to dashboard Cite

It is argued in literature that intensity of regulations and control in the economy is a determinant of informal sector, which however is ignored in most of its estimates. This paper uses a new variant of Currency Demand (CD) approach where ‘unemployment’ and ‘intensity of government control’ are used to estimate shadow economy, alongside traditional tax variable. We choose Pakistan since it has a significant share of its activities in the informal sector along with the history of various political and dictatorial regimes. Further, there are examples of bureaucratic control leading to corruption in the economy. It provides an opportunity to study the nexus between regulation intensity and informal economy and present a case study for other developing countries exercising control over the economy through the large size of its public sector. The results show that the intensity of control variable has statistically and economically significant role in increasing shadow economy, almost equivalent to tax coefficient. Once the yearly variation in our estimates is mapped with various political regimes it seems that the validity of estimates is reinforced considering policy inconsistencies and prominent events of each regime.

show abstract

“…Other approaches are labour market approach, MIMIC approach, electricity approach, fiscal approach etc. Several studies in Pakistan have used monetary approach to estimates the size of undocumented economy [Shabsigh (1995); Ahmed and Qazi (1995); Iqbal, Qureshi, and Mahmood (1998); Aslam (1998); Kemal (2003Kemal ( , 2007; Yasmin and Rauf (2003)], while Arby, Jahanzeb, and Hanif (2009) and Gulzar, Junaid, and Haider (2010) also used MIMIC approach and electricity approach to estimate the size of unrecorded economy. However all these approaches have number of problems among which first and major problem is that indicators of unrecorded economy are indicating the size of unrecorded economy.…”

Section: Introductionmentioning

confidence: 99%

Precise Estimates of the Unrecorded Economy

Kemal

Qasim

2022

pdr

View full text Add to dashboard Cite

Informal economy in Pakistan is the backbone of the economy. However, the problem is that we do not know how big it is due to non-availability of the precise estimates of unrecorded1 economy. Precise estimates of the unrecorded economy would help policy-makers to make better macroeconomic policies. If unrecorded economy becomes part of the recorded economy government can seek revenues from it and rest of the sectors may have to take lesser burden of taxes. This would be a win-win situation for the government and for those sectors that are part of the documented system. In return, by becoming part of the documented economic system the undocumented sector can enjoy all those benefits and incentives that are available to the formal sector.

show abstract

Estimation of the Black Economy of Pakistan through the Monetary Approach

Cited by 24 publications

References 4 publications

What is Hidden, in the Hidden Economy of Pakistan? Size, Causes, Issues, and Implications

What is Hidden, in the Hidden Economy of Pakistan? Size, Causes, Issues, and Implications

Intensity of Regulations as a Cause of the Informal Sector

Precise Estimates of the Unrecorded Economy

Contact Info

Product

Resources

About