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Money Laundering in a Microfounded Dynamic Model: Simulations for the U.S. and the EU-15 Economies

Author

Listed:
  • Bagella Michele

    (University of Rome Tor Vergata)

  • Busato Francesco

    (University of Naples Parthenope)

  • Argentiero Amedeo

    (University of Rome Tor Vergata; Institute for Studies and Economic Analyses (ISAE))

Abstract

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.

Suggested Citation

  • Bagella Michele & Busato Francesco & Argentiero Amedeo, 2009. "Money Laundering in a Microfounded Dynamic Model: Simulations for the U.S. and the EU-15 Economies," Review of Law & Economics, De Gruyter, vol. 5(2), pages 879-902, December.
    • Handle: RePEc:bpj:rlecon:v:5:y:2009:i:2:n:4
    DOI: 10.2202/1555-5879.1420
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    Cited by:

    1. Amedeo Argentiero & Carlo Andrea BOLLINO, 2013. "The Mmeasurement of Underground Economy: A Dynamic-Simulation Based Approach," Quaderni del Dipartimento di Economia, Finanza e Statistica 123/2013, Università di Perugia, Dipartimento Economia.
    2. Joras Ferwerda & Mark Kattenberg & Han-Hsin Chang & Brigitte Unger & Loek Groot & Jacob A. Bikker, 2013. "Gravity models of trade-based money laundering," Applied Economics, Taylor & Francis Journals, vol. 45(22), pages 3170-3182, August.
    3. June Buchanan & Yun Shen, 2021. "To launder or not to launder: are there positive effects for the economies of countries who launder money?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 2697-2716, June.
    4. Schneider, Friedrich, 2010. "The (Hidden) Financial Flows of Terrorist and Organized Crime Organizations: A Literature Review and Some Preliminary Empirical Results," IZA Discussion Papers 4860, Institute of Labor Economics (IZA).
    5. Unger Brigitte, 2009. "Money Laundering - A Newly Emerging Topic on the International Agenda," Review of Law & Economics, De Gruyter, vol. 5(2), pages 807-819, December.
    6. Friedrich Schneider, 2013. "The Financial Flows of Transnational Crime and Tax Fraud in OECD Countries," Public Finance Review, , vol. 41(5), pages 677-707, September.
    7. Brigitte Unger, 2013. "Can Money Laundering Decrease?," Public Finance Review, , vol. 41(5), pages 658-676, September.
    8. Stefan Haigner & Friedrich Schneider & Florian Wakolbinger, 2012. "Combating Money Laundering and the Financing of Terrorism: A Survey," Economics of Security Working Paper Series 65, DIW Berlin, German Institute for Economic Research.
    9. Schneider, Friedrich, 2017. "Restricting or Abolishing Cash: An Effective Instrument for Fighting the Shadow Economy, Crime and Terrorism?," International Cash Conference 2017 – War on Cash: Is there a Future for Cash? 162914, Deutsche Bundesbank.
    10. Friedrich Schneider, 2011. "The Financial Flows of the Transnational Crime: Some Preliminary Empirical Results," Economics of Security Working Paper Series 53, DIW Berlin, German Institute for Economic Research.
    11. Carmela D’Avino, 2023. "Money laundering and AML regulatory and judicial system regimes: investigation of FinCEN files," European Journal of Law and Economics, Springer, vol. 55(2), pages 195-223, April.
    12. Raffaella Barone & Donato Masciandaro, 2011. "Organized crime, money laundering and legal economy: theory and simulations," European Journal of Law and Economics, Springer, vol. 32(1), pages 115-142, August.
    13. Raffaella Barone & Roy Cerqueti & Anna Quaranta, 2012. "Illegal finance and usurers behaviour," European Journal of Law and Economics, Springer, vol. 34(2), pages 265-277, October.
    14. Friedrich Schneider & Raul Caruso, 2011. "The (Hidden) Financial Flows of Terrorist and Transnational Crime Organizations: A Literature Review and Some Preliminary Empirical Results," Economics of Security Working Paper Series 52, DIW Berlin, German Institute for Economic Research.

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