Modeling Informal economy in the Republic of Macedonia

• Author: Dashmir Asani
• Position: Faculty of Economy, University of Tirana
• Pages: 50-60

Vo

l.

5

N

o

.

3

N

ovem

b

er

,

2019

A

cademic Journal o

f

Business,

A

dministration, Law and Social Science

s

II

PCCL Publishin

g

, Graz-

A

ustri

a

I

SSN 2410-391

8

A

cces online at www.ii

p

ccl.or

g

50

M

odeling In

f

ormal econom

y

in the Republic o

f

Macedoni

a

PhD (C.) Dashmir Asan

i

Faculty of

E

conomy,

U

niversity of Tirana

Ab

str

a

ct

I

nformal economy is di cult to be estimated if assumption of modes weren’t fulf‌i lled. Here

we describe some elements of the calculation in the particular case of the economy where

complex dynamics is accompanied with some lack on the model’s requirements.

I

n our case

study of the Republic of Macedonia, we used to work with very small number of data points

in an acceptable stable regime obtained in [2004, 2016] making use of additional modeling

and calculation tools. Next, a particular variable –remi ances-shows an important e ect in

o

v

e

r

a

ll b

e

h

a

v

io

r

a

nd

i

s

i

ncl

u

d

e

d

i

n

a

n

a

d h

o

c c

a

lc

u

l

a

t

io

n.

A

s r

e

s

u

lt w

e

o

bt

ai

n

e

d th

a

t

i

nf

o

rm

a

l

economy in RM in this interval has reached the highest values of around 38% of GDP at 2010

and decrease toward 30

%

at 2016.

Ke

y

words

:

I

nformal and shadow economy, currency demand approach, taxation policy,

M

I

M

I

C m

o

d

e

l.

I

ntr

oduc

t

io

n

There are de

f

erent views on what is called

I

n

f

ormal econom

y

.

I

n a ver

y

strict language

it is de

f‌i

ned as

p

art o

f

a countr

y

’s econom

y

that is not registered and there

f

ore it

is o



ciall

y

unknown.

I

n re

f

erences [1], [2] the de

f‌i

nition o

f

hidden econom

y

as the

unobservable one is reserved onl

y

f

or the

p

art o

f

unregistered econom

y

that is created

a

s result o

f

evading

f

ormal o



cial records to sim

p

l

y

esca

p

e the Taxes’ duties. But

unregistered econom

y

could originate

f

rom criminal activities as well and in [3] it is

detailed this as

p

ect. However, this is ex

p

ected to have di



erent structure.

I

n this case

the accurac

y

o

f

the estimation could be strongl

y

a



ected

f

rom the size o

f

this last.

E

vidences show that obtaining an a

pp

ro

p

riate model and

f‌i

xing the set

f

or variables

o

f

p

articular models consist in a care

f

ul anal

y

sis o

f

concrete econom

y

under stud

y

as

seen in [5] ,[6] , [7] an man

y

others considerations.

U

suall

y

the calculation techni

q

ue

ca

ll

e

d

t

h

e currenc

y

d

eman

d

a

pp

roac

h

(CD

A

) is consi

d

ere

d

as an a

pp

ro

p

riate mo

d

e

l

giving evidences o

f

relationshi

p

s between in

f

ormal econom

y

ex

p

ressed in in the

mone

y

out o

f

de

p

osits and some variables.

I

n the most sim

p

le e

q

uation it has the

f

ollowing

f

orm:

()

εγβα

+−++=

ttti

t

RTaxGDP

M

C1loglnln

(

1

)

M is narrow

/

broad mone

y

, C the mone

y

in circulation,

Tax is the average tax rate and R is the interest rate

f

or

De

p

osits.

A

not

h

er met

h

o

d

is t

h

e M

I

M

I

C mo

d

e

l

t

h

at

p

ut the in

f

ormal econom

y

in the middle

p

oint between

f

actors and indicators.

I

t looks like the

f

ollowing

:

(

2

)

Where in

I

ndicator

Y

could be

p

laced an

y

η

ε

+

⎟

⎟

⎟

⎟

⎟

⎠

⎞

⎜

⎜

⎜

⎜

⎜

⎝

⎛

Γ=

+Γ=

⎟

⎟

⎠

⎞

⎜

⎜

⎝

⎛

FactorX

CapitaGNI

tUnemplymen

RateTax

InformalGDP

IndicatorY

GDP

_

.

_

.