Fanta, F and Mohsin, H (2010): Anti-Money Laundry regulation and Crime: A two-period model of money-in-the-utility-function.
Download (287Kb) | Preview
The paper presents a two period model with two types of money i.e. dirty and cleans (legal) money in utility function. Clean money is earned from working in legal sector and dirty from illegal sector. Our two-two period model reveals that an increase in labor wage in legal sector unambiguously decease the labor hours allocated for illegal sector by increasing the opportunity cost for illegal activities. However, the crime-reducing impact of anti-money laundry regulation and the probability of the agent to be caught require both parameters should be above some threshold. This finding is extension to the existing literature. This threshold is a function of the marginal rate of substitution of ‘dirty’ money for consumption and the responsiveness of illegal income to the policy parameter. Higher threshold implies the need for tougher anti-money laundry regime. Therefore, the marginal rate of substitution between ‘dirty’ money and consumption, and the elasticity of illegal income to the policy parameter are the key in the formulation of anti money laundering policy.
|Item Type:||MPRA Paper|
|Original Title:||Anti-Money Laundry regulation and Crime: A two-period model of money-in-the-utility-function|
|English Title:||Anti-Money Laundry regulation and Crime: A two-period model of money-in-the-utility-function|
|Keywords:||Money laundry, crime, money in utility function, money|
|Subjects:||C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61 - Optimization Techniques; Programming Models; Dynamic Analysis
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E26 - Informal Economy; Underground Economy
|Depositing User:||Hasan Muhammad Mohsin|
|Date Deposited:||13. Oct 2010 09:05|
|Last Modified:||12. Feb 2013 13:37|
Araujo, R.A. and S.T.Moreira, 2005, An Inter-Temporal Model of Dirty Money, Journal of Money Laundry Control, Vol.8, Issue 8, 260-262.
Camera, G., 2001, Dirty money, Journal of Monetary Economics 47, 377-415.
Ferwerda, J., 2008, The Economics of Crime and Money Laundering: Does Anti-Money Laundering Policy Reduce Crime? Tjalling C. Koopmans Research Institute, Discussion Paper Series 08-35. Gilmore, W., 1999, Dirty Money: The Evolution of Money Laundering Countermeasures, Strasbourg, France: Council of Europe Publishing. Lopez-de-Silanes, F. and A. Chung, 2007, Money laundering and Its Regulation, Inter-American Development Bank, Research department, working paper # 590.
Masciandaro, D., 1999, Money Laundering: the Economics of Regulation, European Journal Of Law and Economics.
Masciandaro, D., 1999, “Illegal Sector, Money Laundering and Legal Economy: A Macroeconomic Analysis.” Journal of Financial Crime 2: 103-112.
Moreira, S. T., 2007, A Two-Period Model of Money Laundering and Organized Crime, Economics Bulletin, Vol. 11, No. 3,1-5.
Reuter, P. and Truman, E.M. 2004. Chasing dirty money: The fight against money laundering. Washington D.C.: Institute for International Economics
Sidrausky, M., 1967, Rational Choice and Pattern of Growth in Monetary Economics, American Economic Review, Vol.57, No.2, 534-544.
Vaithilingam, S. and M. Nair, 2007, Factors affecting money laundering: lesson for developing Countries, Journal of Money Laundering Control, Vol. 10, No. 3.
Wasserman, W., 2002, Dirty Money, Regional Review Q1.