Estimating the size of informal economy in a post-transition country – the case of Poland
Estimating the size of informal economy in a post-transition country – the case of Poland
Author(s): Stanisław Cichocki, Andrzej TorójSubject(s): National Economy, Economic history, Economic policy, Political economy, Social Theory, Economic development, Fiscal Politics / Budgeting, Socio-Economic Research
Published by: BICEPS/SSE Riga
Keywords: informal economy; currency demand approach; cointegration; vector error correction;
Summary/Abstract: The size of the informal economy in Poland is estimated by means of the Currency Demand Approach (CDA). Using quarterly data for the period 1999–2019, we adopt two separate econometric approaches. First, we specify a single equation model to estimate it with the Fully-Modified OLS method. Second, the CDA coefficients are treated as a cointegrating vector in a cointegrated VAR. The size of the informal economy in Poland is found to have diminished from about 32% of GDP in 2000 to about 12% of GDP in 2019. We provide confidence intervals for our estimates which, to our best knowledge, are rarely presented in the literature; their width ranges from 3 to 7% of GDP.
Journal: Baltic Journal of Economics
- Issue Year: 23/2023
- Issue No: 1
- Page Range: 91-116
- Page Count: 26
- Language: English