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Dollarisation and the Underground Economy: Accidental Partners?

Author

Listed:
  • Vedran Sosic

    (Croatian National Bank, Zagreb)

  • Michael Faulend

    (IMF, Washington)

Abstract

Monetary methods of measuring the underground economy (UE) in all their variations are traditionally based upon domestic monetary aggregates. In recent times, however, there has been an increasing amount of evidence supporting the thesis that it is actually foreign currency that is very often linked with the UE in countries in which the phenomenon of dollarisation is widespread. New understanding of the extent and dynamics of dollarisation can, then, provide important information about the dynamics of the UE in these countries. Results derived from estimates of the amount of foreign cash in circulation in Croatia, in our estimation, show a rising tendency in the UE, like traditional monetary methods, which in principle does not have to be the case. Similar tendencies in the UE are indicated by the dynamics of electricity consumption.

Suggested Citation

  • Vedran Sosic & Michael Faulend, 2002. "Dollarisation and the Underground Economy: Accidental Partners?," Occasional paper series 15, Institute of Public Finance.
    • Handle: RePEc:ipf:occasi:15
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    References listed on IDEAS

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    More about this item

    Keywords

    underground economy; dollarisation;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other

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