The Canadian Underground and Measured Economies: Granger Causality Results

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.

Abstract

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
• Language: English
• 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

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