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Bounds Test approach for the Long Run Relationship between Shadow Economy and Official Economy. An Empirical Analysis for Romania
Keywords
shadow economy, currency demand approach, economic development, ARDL cointegration approach, CUSUM, CUSUMQ tests
Abstract
The paper aims to investigate the nature of the relationship between the shadow economy (SE) and recorded GDP for the case of Romania using Pesaran et al.(2001) bounds tests approach for cointegration for the period 2000-2010. The size of Romanian shadow economy is estimated using a revised version of the currency demand approach based on autoregressive distributed lag (ARDL) approach to cointegration analysis. To investigate the long-run causal linkages and short-run dynamics between shadow economy and recorded GDP, ARDL cointegration approach is applied.
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