Revisiting the relationship between unemployment rate and the size of the shadow economy for United States using Johansen approach for cointegration

摘要

The paper revisits and investigates the possible co-integration and direction of causality between unemployment rate(UR) and the size of the shadow economy(SE) in case of USA, by employing Johansen and Granger approaches, using quarterly data covering the period 1980-2009. The shadow economy is estimated as percentage of official GDP, using MIMIC model and their dimension is decreasing over the last two decades.rnThe empirical results reveal the existence of a long run relationship between the two variables. Furthermore, the Granger causality tests identify a unidirectional causality that runs from unemployment rate to the size of shadow economy.