Money laundering in a two-sector model: using theory for measurement

Abstract

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

Organized crime, money laundering and legal economy: theory and simulations

“…Argentiero et al (2008), presented a methodology for constructing a ML series for Italy , starting from a theoretical model. ML accounts for approximately 9% of GDP.…”

“…12 Masciandaro (1999) and Masciandaro et al (2007). 13 Microeconomic models on illegal activities and money laundering are presented in Masciandaro (2007), Siva Moreira (2007), Argentiero et al (2008) and Ferwenda (2009). 14 The financial sector is the most affected by money laundering (Europol 2006(Europol , 2007(Europol , 2008.…”

Money Laundering - A Newly Emerging Topic on the International Agenda

“…Michele Bagella, Francesco Busato and Amedeo Argentiero, who in 2008 developed a theoretical model for estimating money laundering in Italy (see Argentiero et al, 2008), expand this dynamic two-sector equilibrium model and simulate it for the US and the EU-15 countries in this contribution.…”

Uncovering Unobserved Economy: A General Equilibrium Characterization

“…() and Argentiero and Bollino (, ) on underground economy, and Argentiero et al . () on money laundering, we build a DSGE model in which there are three private sectors, each one with a representative firm: A sunlight firm, which produces a legal good and pays taxes and social security contributions. An underground firm that, although producing the same legal good as the sunlight firm, does not pay any form of tax and therefore has a higher profit than the sunlight firm, whenever it is undetected by fiscal authorities; if, instead, it is discovered evading, it will pay a fine and, thereafter, taxes and social security contributions like the sunlight firm. A criminal firm that produces an illegal good and, if it is not discovered evading and carrying out criminal offenses, it will not pay any form of taxes as the underground firm. However, in the case of detection, it is forced to close, workers are arrested and the government confiscates the entire stock of productive capital. …”

“…() and Argentiero and Bollino (, ) for underground economy and by Argentiero et al . () for money laundering.…”