Quantitative Methods for Evaluating the Informal Economy. Case Study at the Level of Romania

Abstract

The evaluation of the hidden economy involves major difficulties related to the use of an adequate methodology and to ensuring the necessary database for estimating some econometric models and some economic variables. The studies conducted showed that the size and forms of the informal economy differ from one country to another. The transition from the economies of the former socialist countries led to an increase in the size of the hidden economy. The highest levels are recorded in some former Soviet republics and in some South American countries. The evaluations made at the level of Romania estimated that the hidden economy accounts for approximately 30% of the Gross Domestic Product. This paper evaluates the size of the hidden economy on the basis of an econometric approach which assesses the cash outside the banking system according to various factors and to its use in official and hidden economy transactions.

Keywords

• informal economy
• econometric model
• cash outside the banking system
• monetary method
• regression models