Giles, David E..A. and Tedds, Lindsay M. and Werkneh, Gugsa (2002): The Canadian Underground and Measured Economies: Granger Causality Results. Published in: Applied Economics , Vol. 18, No. 34 (2002): pp. 2347-2352.
Download (260kB) | Preview
Using new time-series data for the size of the Canadian underground economy, the relationship between unreported and measured GDP in that country is examined. Granger causality tests are conducted, with a proper allowance for the non-stationarity of the data. It is found that there is clear evidence of such causality from measured GDP to hidden output, but only very mild evidence of Granger causality in the reverse direction. This result supports similar evidence for New Zealand reported by the first author, and has several interesting policy implications.
|Item Type:||MPRA Paper|
|Original Title:||The Canadian Underground and Measured Economies: Granger Causality Results|
|Keywords:||underground economy, Granger causality, business cycles|
|Subjects:||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Prediction Methods ; Simulation Methods
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E26 - Informal Economy ; Underground Economy
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance
|Depositing User:||Lindsay Tedds|
|Date Deposited:||03 Jul 2012 02:16|
|Last Modified:||11 Aug 2016 20:41|
Aigner, D. J., Schneider, F. and Ghosh, D. (1986), Me and my shadow: estimating the size of the U.S. hidden economy from time-series data, in Dynamic Econometric Modeling: Proceedings of the Third International Symposium in Economic Theory and Econometrics, (Eds.) W. A. Barnett et al., Cambridge University Press, Cambridge, pp.297-334
Auditor General of Canada (1999), Report of the Auditor General of Canada, Office of the Auditor General of Canada and the Commissioner of the Environment and Sustainable Development, Ottawa.
Caragata, P. J. and Giles, D. E. A. (2000) Simulating the relationship between the hidden economy and the tax size and tax mix in New Zealand, in Taxation and the Limits of Government (Eds.) G.W. Scully and P. J. Caragata, Kluwer, Boston, 221-240.
DeBenedictis, L. and Giles, D. E. A. (1998) Diagnostic testing in econometrics: variable addition, RESET, and Fourier approximations, in Handbook of Applied Economic Statistics, (Eds.) A. Ullah and D. E. A. Giles, Marcel Dekker, New York, pp.383-417
Dickey, D. A. and Fuller, W. A. (1979) Distribution of the estimators for autoregressive time series with a unit root, Journal of the American Statistical Association, 74, 427-431.
Dickey, D. A. and Fuller, W. A. (1981) Likelihood ratio statistics for autoregressive time series with a unit root, Econometrica, 49, 1057-1072.
Dickey, D. A. and Pantula, S. G. (1987) Determining the order of differencing in autoregressive processes, Journal of Business and Economic Statistics, 15, 455-461.
Dods, J. L. and Giles, D. E. A. (1995) Alternative strategies for 'augmenting' the Dickey-Fuller test: size-robustness in the face of pre-testing, Journal of Statistical Computation and Simulation, 53, 243-258.
Dolado, J. J., Jenkinson, T. and Sosvilla-Rivero, S. (1990) Cointegration and unit roots, Journal of Economic Surveys, 4, 249-273.
Engle, R. F. and Granger, C. W. J. (1987) Co-integration and error correction: representation, estimation and testing, Econometrica, 55, 251-276.
Frey, B. S. and Weck-Hannemann, H. (1984) The hidden economy as an 'unobserved' variable”, European Economic Review, 26, 33-53.
Giles, D. E. A. (1997a) Causality between the measured and underground economies in New Zealand, Applied Economics Letters, 4, 63-67.
Giles, D. E. A. (1997b) Testing for asymmetry in the measured and underground business cycles in New Zealand, Economic Record, 72, 225-232.
Giles, D. E. A. (1999a) The rise and fall of the New Zealand underground economy: are the responses symmetric?, Applied Economics Letters, 6, 185-189.
Giles, D. E. A. (1999b) Measuring the hidden economy: implications for econometric modelling, Economic Journal, 109, F370-F380.
Giles, D. E. A. (1999c) Modelling the hidden economy and the tax-gap in New Zealand, Empirical Economics, 24, 621-640.
Giles, D.E.A. and Caragata, P. J. (2001) The learning path of the hidden economy: tax and growth effects in New Zealand”, Applied Economics, 33, 1857-1867.
Giles, D. E. A. and Tedds, L. M. (2002) Taxes and the Canadian Underground Economy, Canadian Tax Foundation, Toronto.
Granger, C. W. J. (1969) Investigating causal relations by econometric models and cross spectral methods, Econometrica, 37, 434-438.
Jöreskog, K. and Sörbom, D. (1993) LISREL 8: Structural Equation Modeling With the SIMPLIS Command Language, Scientific Software International, Chicago.
Kwiatowski, D., Phillips, P. C. B., Schmidt, P. and Shin, Y. (1992) Testing the null hypothesis of stationarity against the alternative of a unit root: how sure are we that economic time series have a unit root?, Journal of Econometrics, 54, 159-178.
Langfeldt, E. (1985) Is a growing unobserved sector undermining monetary policy in the Federal Republic of Germany?, in The Economics of the Shadow Economy (Eds.) W. Gaertner and A. Wenig, Springer-Verlag, Berlin, pp. 301-314. Loayza, N. V. (1996) The economics of the informal sector: a simple model and some empirical evidence from Latin America”, Carnegie-Rochester Conference Series on Public Policy, 45, 129-162.
MacKinnon, J. G. (1991) Critical values for co-integration tests, in Long-Run Economic Relationships (Eds.) R. F. Engle and C. W. J. Granger, Oxford University Press, Oxford, pp.267-276.
Said, S. E. and Dickey, D. A. (1984) Testing for unit roots in autoregressive-moving average models of unknown order, Biometrika, 71, 599-607.
Schneider, F. and Dominik Enste (2000) Shadow economies: size, causes and consequences, Journal of Economic Literature, XXXVIII, 77-114.
SHAZAM (1997) SHAZAM Econometrics Computer Program: User's Reference Manual, Version 8.0, McGraw-Hill, New York.
Tedds, L. M. (1998) Measuring the size of the hidden economy in Canada, unpublished M.A. Extended Essay, Department of Economics, University of Victoria, B.C..
Toda, H. Y. and Yamamoto, T. (1995) Statistical inference in vector autoregressions with possibly integrated processes, Journal of Econometrics, 66, 225-250.