Table of Contents
Economics Research International
Volume 2014 (2014), Article ID 891237, 14 pages
http://dx.doi.org/10.1155/2014/891237
Research Article

An Empirical Estimation of the Underground Economy in Ghana

1Department of Economics, Georg-August Universität Göttingen, Heinrich-Düker-Weg 12, 37073 Göttingen, Germany
2Department of Economics and Finance, University of Guelph, Guelph, ON, Canada N1G 2W1

Received 29 April 2014; Accepted 9 June 2014; Published 21 July 2014

Academic Editor: Vicente Esteve

Copyright © 2014 Edward Asiedu and Thanasis Stengos. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The main aim of this paper is to estimate the size of the underground economy in Ghana during the period 1983–2003. There is no agreement on the appropriate estimation approach to adopt to measure the size of the underground activities. To this end, we employ the well-applied currency demand approach in our measurement. Parameter estimates from the estimated currency demand equation are used in quantifying the ratio of “underground” to “measured” output/income for the Ghanaian economy. The estimated long-run average size of the underground economy to GDP for Ghana over the period is 40%. The underground economy is found to vary from a high of 54% in 1985 to a low of 25% in 1999. Estimates may represent lower bound estimates.