Un modelo Mundell-Fleming con economía ilegal y lavado de dinero

Slim, Sadri (2015): Un modelo Mundell-Fleming con economía ilegal y lavado de dinero.

Abstract

The purpose of this paper is to present an extended version of the Mundell-Fleming model which allows a macroeconomic analysis of the effects stemming from illegal economy with money laundering on the short-term equilibrium for a small open economy. Without disregarding the FATF´s money laundering typology, we propose to differentiate the money laundering activities by the degree of crime organization, i.e. differentiating between individual, national as well as transnational crimes. According to the previous taxonomy, we postulate four channels of money laundering that enable the reintegration of illegal money, through consumption, investment, international trade and capital movements. In this context, it is shown that the multiplier effect triggered by illegal economic activities is always negative on formal GDP. However, the effect on the interest rate is subtler and depends on the structure of the given economy, which could lead to an appreciation or depreciation of the exchange rate related to the degree of capital mobility.

• Item Type: MPRA Paper
• English Title: Modeling illegal economy and money laundering: a Mundell-Fleming framework
• Language: Spanish
• Keywords: Illegal Economy, Money Laundering, Mundell-Fleming, Flexible Exchange Rate, Multiplier, Money Demand, Liquidity Preference
• Subjects: E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E26 - Informal Economy ; Underground Economy; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; K - Law and Economics > K4 - Legal Procedure, the Legal System, and Illegal Behavior > K42 - Illegal Behavior and the Enforcement of Law; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements

References

Araujo R., Silva-Moreira T. (2005): An inter-temporal model of dirty money, Journal of Money Laundering Control, vol. 8, (3), pp. 260-262.

Argentiero A., Bagella M., Busato F. (2008): Money laundering in a 2 sector model using theory for measurement, European Journal of Law and Economics, vol. 26 (3), pp. 341-359.

Bajada C. (2003): Business cycle properties of the legitimate and underground economy in Australia, Economic Record, vol. 79 (247), pp. 397-411.

Barthélemy P. (1988): The macroeconomic estimates of the hidden economy: a critical analysis, Review of Income and Wealth, Vol. 34 (2), pp. 183-208.

Beja E. (2007): Forensic accounting: hidden balance of payments of the Philippines, Political Economy Research Institute, University of Massachusetts Amherst, working paper #130, pp. 1-15.

Bhagwati J. (1967): Fiscal policies, the faking of foreign trade declarations, and the balance of payments, Bulletin of the Oxford University Institute of Economics & Statistics, vol. 29 (1), pp. 31-77.

Bhagwati J., Bent H. (1973): A theoretical analysis of smuggling, The Quarterly Journal of Economics, Vol. 87 (2), pp. 172-187.

Bhagwati J., Chipman J. (ed) (1974): Studies in International Trade. Illegal Transactions in International Trade, volume 1, North Holland Publishing Company, Amsterdam, Netherlands.

Boughton J. (2002): On the origins of the Fleming-Mundell model, International Monetary Fund, working paper # 20/107, pp. 1-12.

Bright D., Delaney J. (2013): Evolution of a drug trafficking network: Mapping changes in network structure and function across time, Global Crime, vol. 14 (2-3), pp. 238-260.

Capuano C., Purificato F. (2012): Macroeconomic impact of organized crime: a neo-Kaleckian perspective, Munich Personal RePec Archive, MPRA Paper # 40077, pp. 1-33.

Dabla-Norris E., Feltenstein A. (2003): An analysis of the underground economy and its macroeconomic consequences, International Monetary Fund, working paper # 03/23, pp. 1-26.

Dai M. (2011): Règle du taux d´intérêt et politique d´assouplissement quantitatif avec un rôle pour la monnaie, Bureau d´Economie Théorique et Appliquée, BETA-CNRS, Université Louis Pasteur, Strasbourg, France, document de travail 2011/05, pp. 1-29.

Daniele V., Marani U. (2010): Organized crime and foreign direct investment: the Italian case, Center for Economic Studies, CESifo working paper # 2416, pp. 1-27.

de Boyrie M., Pak S., Zdanowicz J. (2005a): The impact of Switzerland’s money laundering law on capital flows through abnormal pricing in international trade, Applied Financial Economics, vol. 15 (4), pp.217-230.

de Boyrie M., Pak S., Zdanowicz J. (2005b): Estimating the magnitude of capital flight due to abnormal pricing in international trade: The Russia–USA case, Accounting Forum, vol. 29, pp. 249-270.

de Boyrie M., Nelson J., Pak S., Zdanowicz J. (2007): Capital movement through trade misinvoicing: the case of Africa, Journal of Financial Crime, vol. 14 (4), pp. 474-489.

de Maillard J. (1998): Un Monde Sans Loi, La Criminalité Financière en Images, Stock, Paris, France.

Detotto D., Otranto E. (2010): Does crime affect economic growth ?, Kyklos, vol. 63 (3), pp. 330-345.

Eilstrup-Sangiovanni M., Jones C. (2008): Assessing the Dangers of Illicit Networks, International Security, vol. 33 (2), pp. 7-44.

FATF (2006): Trade Based Money Laundering, FATF-OECD, Paris, France.

FATF (2010a): Money Laundering Vulnerabilities of Free Trade Zones, FATF-OECD, Paris, France.

FATF (2010b): Money Laundering through Money Remittance and Currency Exchange Providers, MONEYVAL- FATF-OECD, Paris, France.

FATF (2012): Illicit Tobacco Trade, FATF-OECD, Paris, France.

FATF (2013): Money Laundering and Terrorist Financing through Trade in Diamonds, FATF-OECD, Paris, France.

Feige E. (1994): The underground economy and the currency enigma, Public Finance (Supplement), vol. 49, pp. 119-139. Fleming M. (1962): Domestic financial policies under fixed and under floating exchange rates, International Monetary Fund, Staff Papers, vol. 9 (3), pp. 369-380.

Freidman B. (2003): The LM curve: a not-so-fond farewell, National Bureau of Economic Research, Cambridge, Massachusetts, USA, working paper # 10123.

Frenkel J., Razin A. (1987): The Mundell-Fleming model a quarter century later: a unified exposition, International Monetary Fund, Staff Papers, vol. 34 (4), pp. 567-620.

Groupe d'Action Financière (1989): La Lutte Contre le Blanchiment des Capitaux, Samuel-Lajeunesse D. (ed), La Documentation Française, Paris, France.

Granda-Carvajal C. (2010): The unofficial economy and the business cycle: a test for theories, International Economic Journal, vol. 24 (4), pp. 576-586.

Granda-Carvajal C. (2012): Macroeconomic implications of the underground sector: challenging the double business cycle approach, Economic Analysis and Policy, vol. 42 (2), pp. 237-256.

Granovetter M. (1985): Economic action and social structure: the problem of embeddedness, American Journal of Sociology, vol. 91 (3), pp. 481-510.

Gupta P., Roy D., Ahmad K. (2012): Close eye or closed eye: export misinvoicing in Bangladesh, International Food Policy Research Institute, working paper # 01157, pp. 1-25.

Kant C. (1996): Foreign Direct Investment and capital flight, Princeton Studies in International Finance, # 80, March.

Kar D. (2012): Mexico: Illicit Financial Flows, Macroeconomic Imbalances, and the Underground Economy, Global Financial Integrity, Center of International Policy, Washington DC, USA.

Kopp P. (1992): La structuration de l'offre de drogue en réseaux, Revue Tiers Monde, vol. 33 (113), pp.517-536.

Kebabdjian G. (1987): Les Modèles Théoriques de la Macro-Economie, Collection Economie "module", Dunod, Paris, France.

Koening G. (2005): Les modèles de type Mundell–Fleming revisités, Bureau d´Economie Théorique et Appliquée, BETA-CNRS, Université Louis Pasteur, Strasbourg, France, document de travail 2005/03, pp. 1-63.

Kenen P. (1985): Macroeconomic theory and policy: how the closed economy was opened ?, in Handbook of International Economics, vol. 2, Jones R., Kenen P. (eds), pp. 625-677, Elsevier, Amsterdam, Netherlands.

Krueger A. (1965): The impact of alternative government policies under varying exchange systems, Quarterly Journal of Economics, vol. 79 (2), pp. 195-208.

Krugman P. (2000): How complicated does the model have to be ?, Oxford Review of Economic Policy, vol. 15 (4), pp. 33-42.

Liao J., Acharya A. (2011): Transshipment and trade based money laundering, Journal of Money Laundering, vol. 14 (1), pp. 79-92.

Masciandaro D. (2000): The illegal sector, money laundering and the legal economy: a macroeconomic analysis, Journal of Financial Crime, vol. 8 (2), pp. 103-112.

Michaely M. (1968): The impact of alternative government policies under varying exchange systems: comment, Quarterly Journal of Economics, vol. 82 (3), pp. 508-510.

Muet P.A. (1979): La modélisation macroéconomique : une étude de la structure et de la dynamique des modèles macro-économétriques, Statistiques et Etudes Financières, Hors-Série, pp. 3-62.

Mundell R. (1960): The monetary dynamics of international adjustment under fixed and flexible exchange rates, Quarterly Journal of Economics, vol. 74 (2), pp. 227-257.

Mundell R. (1963): Capital mobility and stabilization policy under fixed and flexible exchange rates, Canadian Journal of Economics and Political Science, vol. 29 (4), pp. 475-485.

Mundell R., Arnon A., Young W. (eds.) (2002): The Open Economy Macromodel: Past, Present and Future, Springer Science - Business Media, New York, USA.

Obstfeld M. (2001): International macroeconomics: Beyond the Mundell-Fleming model, International Monetary Fund, Staff Papers, vol. 47, Special Issue, pp. 1-39.

Onnis L., Tirelli P. (2014): Shadow economy: Does it matter for money velocity ?, working paper available at: dropbox.com/s/9ei84g0567gst9g/shadowEE.pdf?dl=0, pp. 1-36, published on line in Empirical Economics, February 2015.

Pak S., Zanakis S., Zdanowicz J. (2003): Detecting abnormal pricing in international trade: the Greece-USA case, Interfaces, vol. 33 (2), pp. 54-64.

Patnaik I., Sen Guta A., Shah A. (2010): Determinants of trade misinvoicing, National Institute of Public Finance and Policy, New Delhi, India, working paper # 75, pp. 1-31.

Perez F., Brada J., Drabek Z. (2012): Illicit money flows as motives of FDI, Journal of Comparative Economics, vol. 40 (1), pp. 108-126.

Pollin J-P. (2003): Une macroéconomie sans LM, quelques propositions complémentaires, Revue d´Economie Politique, vol. 113 (3), pp. 273-293.

Romer D. (2000): Keynesian macroeconomics without the LM curve, Journal of Economic Perspectives, vol. 14 (2), pp. 149-169.

Schneider F., Windischbauer U. (2008): Money laundering: some facts, European Journal of Law and Economics, vol. 26 (3), pp.387-404.

Sikdar S. (2008): Capital inflow into developing economies: a macroeconomic study, Institute of Social and Economic Research, Osaka University, Japan, Discussion Paper # 725, pp. 1-13.

Slim S. (2007): Construction d´un modèle macroéconomique keynésien avec économie informelle: un exercice de simulation, Munich Personal RePec Archive, MPRA Paper # 20656, pp. 1-30.

Slim S. (2013): Un modelo IS/LM con economía ilegal y lavado de dinero, Munich Personal RePec Archive, MPRA Paper # 46304, pp. 1-22.

Steiner R., Corchuelo A. (1999): Repercusiones económicas e institucionales del narcotráfico en Colombia, Ensayos Sobre Economía Cafetera, Bogotá, vol. 12 (15), pp. 113-137.

Taylor J. (1993): Discretion versus Policy Rules in Practice, Carnegie-Rochester Conference, Series on Public Policy, vol. 39 (1), pp. 195-214.

UNODC (2008): World Drug Report, United Nations Office on Drugs and Crime, Vienna, Austria.

UNODC (2011): Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organized Crimes, Research Report, United Nations Office on Drugs and Crime, Vienna, Austria.

UNODC (2014): Global Synthetic Drug Assessment, United Nations Office on Drugs and Crime, Vienna, Austria.

Villieu P. (2004): Une macroéconomie sans LM ? Un modèle de synthèse pour l´analyse des politiques conjoncturelles, Revue d´Economie Politique, vol. 114 (3), pp. 289-322.

WTO (2014): International Trade Statistics, World Trade Organization, Geneva, Switzerland.

Young W., Darity W. (2004): IS LM BP an inquest, History of Political Economy, vol. 36 (5), pp. 127-164.

Zdanowicz J. (2009): Trade-Based Money Laundering and Terrorist Financing, Review of Law and Economics, vol. 5 (2), pp. 855-878.