Money Multiplier Bias Due to Informal Sector: An Extension of the Existing Money Multiplier

IF 0.6 Q4 ECONOMICS South Asian Journal of Macroeconomics and Public Finance Pub Date : 2021-01-13 DOI:10.1177/2277978720979888

K. Mughal, F. Schneider, Faheem Aslam, A. Tahir

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引用次数: 1

Abstract

To demonstrate the impact of informal economy on the official money multiplier in currency supply, we present an extension of the basic money multiplier model. The influence of economic policies may differ if they are based only on official statistics without considering the informal sector. Since most of the activities in informal sector are hidden from authorities, it is widely assumed that these activities are based on cash transactions, a part of total currency that cannot be attracted towards deposits due to the holder’s fear of prosecution and taxation, etc. Therefore, it is expected that such currency holdings can give biased results by playing a role in the money multiplier, a phenomenon that is usually ignored while attempting to alter money supply. The article also indicates that because of informal sector, the currency deposit ratio in the money multiplier is smaller than expected (depending on size of the informal sector), leading to a larger multiplier effect. JEL Classifications: E26, E51, O17

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非正规部门造成的货币乘数偏差：现有货币乘数的扩展

为了证明非正规经济对货币供应中官方货币乘数的影响，我们提出了基本货币乘数模型的扩展。如果经济政策仅基于官方统计数据而不考虑非正规部门，其影响可能会有所不同。由于非正规部门的大多数活动都是对当局隐瞒的，人们普遍认为这些活动是基于现金交易，现金交易是总货币的一部分，由于持有者担心被起诉和税务等原因，无法吸引其用于存款，这种现象在试图改变货币供应量时通常被忽视。文章还指出，由于非正规部门，货币乘数中的货币存款比率小于预期（取决于非正规部门的规模），导致了更大的乘数效应。JEL分类：E26、E51、O17

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来源期刊

South Asian Journal of Macroeconomics and Public Finance ECONOMICS-

CiteScore

2.10

自引率

11.10%

发文量

期刊介绍： The purpose of the Journal is to publish (in English language) peer-reviewed articles, reviews and scholarly comments on issues relating to contemporary global macroeconomics and public finance by which is understood: The Journal is for all professionals concerned with contemporary Macroeconomics and Public Finance and is a forum for all views on related subjects. The Editorial Board welcomes articles of current interest on research and application on the areas mentioned above. The Journal will be international in the sense that it seeks research papers from authors with an international reputation and articles that are of interest to an international audience. In pursuit of the above, the journal shall: a. draw on and include high quality work from the international community of scholars including those in the major countries of Asia, Europe, Asia Pacific, the United States, other parts of the Americas and elsewhere with due representation for considerations of the readership. The Journal shall include work representing the major areas of interest in contemporary research on Macroeconomics and Public Finance and on a wide range of issues covering macro- economics, tax and fiscal issues, banking and finance, international trade, labour economics, computational and mathematical methods, etc. The Journal would particularly engage papers on pure and applied economic theory and econometric methods. b. avoid bias in favour of the interests of particular schools or directions of research or particular political or narrow disciplinary objectives to the exclusion of others. c. ensure that articles are written in a terminology and style which makes them intelligible, not merely within the context of a particular discipline or abstract mode, but across the domain of relevant disciplines.