A Currency demands approach to modelling the underground economy in the Philippines

Date

2012

Degree

Bachelor of Science in Economics

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Harvey V. Baldovino

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Abstract

This study aims to estimate the size of the underground economy in the Philippines, from 1976 to 2009. The Currency Demand Approach is used to estimate the size of the underground economy. The study revealed that the tax rate grew from 1986 to the late 1990’s, but decreased from 2000 to 2009. Also, it was observed that currency ratio had declined over the years while demand for currency had increased. Moreover, the study showed that the size of the underground economy and the volume of illegal currency are increasing overtime. Furthermore, it was found that tax evasion grew along with the underground economy. Also, the study observed that the growth rate of the unofficial economy was greater than that of the official economy. Lastly, the study revealed that the underground economy can potentially harm the official economy but it can also be beneficial to some economic agents. Therefore, policy makers should also consider these positive aspects of the underground economy in the planning of policies and should adopt economic policies which drive the shadow activities towards the regular economy rather than pushing policies against them.

Language

English

Location

UPLB College of Economics and Management (CEM)

Document Type

Thesis

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