This study investigates the shadow economy of Czech Republic and the associated losses in tax revenue. The presence of a shadow economy may not necessarily be bad for the economies in which they prevail but they could cause huge losses to government revenue and could also constitute serious violation of labour regulations. The study uses the CurrencyDemand Approach. It measures the size of the shadow economy in two stages: a) the econometric estimation of an aggregate money demand equation b) the calculation of the value of the shadow economy through the quantity theory of money. The key variables in the study include: the total currency held outside the banking system, the number of automatic teller machines, the deposit interest rate, GDP deflator, the average tax, velocity of money, nominal GDP and nominal money supply. The results from the study show that the shadow economy of Czech Republic on the average is about 20.9 % as at the end of 2013 and the country loses an average tax revenue of about 7.2 % of GDP yearly. The data was obtained from the World Bank country indicators and the International Financial Statistics.
The paper estimates the size of underground economy induced by tax evasion for cross- section of non-OECD countries using currencydemand method. Unlike previous studies which usually focus only on the tax rate as the tax evasion factor, the paper presents theory consistent tax evasion estimates by augmenting the enforcements strength of the tax administration as additional determinant of the level of tax evasion. The estimation strategy includes the use of the Arellano-Bond GMM dynamic panel data method that is suitable in dealing with the issue of persistence and endogeneity problems in the estimation of currencydemand equation. The study finds substantial underground economy in the non-OECD countries for the period 1984-2005 ranging from 2-69 percent of GDP.
Despite it probably becoming less important over the years, the relative thinness and weak liquidity of the local financial markets may also contribute to high domestic cash balances. Although the household saving rate in Malta has declined substantially, households have accumulated considerable financial wealth over time. In fact, on a per capita basis, the average Maltese household holds twice the financial assets of the average euro area household. 14 For a considerable period of time, these savings mostly ended up either as cash or bank deposits on account of strict capital controls and the unavailability of alternative assets, such as private debt securities, equity and private pension products. In recent years, Maltese households have had more investment options, both local and overseas, but cash may still have retained a larger-than-average share in their portfolio allocation. Another possible cause could be the shadow economy, i.e . “market -based production of goods and services, whether legal or illegal, that escapes detection in the official estimates of GDP”. 15 A sizeable shadow economy would boost the demand for currency since cash-based transactions are harder to trace. Many US economists in the 1960s and 1970s (such as Cagan and Guttman), 16 who tried to rationalise the rise in currencydemand in the post-war period, noticed that standard price and income variables did not have much explanatory power. They therefore introduced tax burden or government regulation variables, arguing that higher demand for cash was being driven by a desire to operate in the shadow economy. They found that these additional explanatory variables were, indeed, significant.
(Ahumada, Alvaredo, & Canavese, 2008) constructed a formal framework for the collection show that the method of the currency approach is correct only when the income elasticity of demand for money is one. They presented several estimates from several other studies applying corrections and showed that "the assumption of equal velocities along with the income elasticity estimates lower (higher) than one, resulting in biased figures above (below) for the underground economy ". Ahumada and his colleagues reviewed the cash method under aggregation shown that if the model of demand for money for a short time used to calculate the underground economy and whether it includes a variable pattern remained dependent (lagged dependent variable) then you will need an initial period known in which there is zero underground economy and informal requests for money. They conclude that "the only way to avoid ad hoc assumptions about currency values previously recorded is limited to measuring the size of the underground economy to ones based on estimates of long-term demand for money".
Since its launch in early 1999 the performance of the euro in the foreign exchange market With regard to the other major currencies of many observers. A large part of them was waiting for a redeployment of large-scale international portfolios in favor of the new currency. De facto a stock equilibrium point of view it might seem rational to anticipate that the demand for euros would come from a need. This expectation was reinforced hypothesis according to which the European Central Bank would be endowed with a strong credibility both because of the strong independence it enjoys and because it could be considered it would inherit the reputation of the Bundesbank. For some observers such credibility had to have as a counterpart of low interest rates in the euro area. A negative interest rate differential with the United States could be seen as a positive trend in favor of the new currency. This could signal expectations appreciation of the euro leading to an increase in the demand for the new currency and thus its immediate appreciation. Yet as often the foreign exchange market has taken the opposite view of the forecasts a strong euro. The euro zone is found net capital exporter. During its first twenty-two months the European currency lost nearly a third of its initial value against the US dollar. This may seem to be a new anomaly in the foreign exchange market
As mentioned above, even though in the last quarter of 2008, the Albanian banking market faced customer withdrawals of deposits, the liquidity indicators were not impacted significantly. During this period, the higher demand of the banking sector for short-term funding in domestic and foreign currency was met by the reduction of liquid investments, credit lines received from parent banks, as well as liquidity borrowed from Bank of Albania.
money demand when diversified currency holdings behavior exists, which further increase the extent of currency appreciation. Although this paper achieved interesting results and addressed gaps in extant literature, the following limitations and inadequacies were present: (1) For the convenience of analysis, we adopted the two-country with equal size setting in our model. This setting uses strong assumptions for the basis of analysis, that country scale asymmetry analysis had to be eliminated from this study, (2) we ignored the analysis of the cost of foreign currency holdings, (3) the NOEM model we used in this paper involved many parameters and variables result in complexity in our analysis. Although we examined the role of current account regarding the effects of diversified currency holdings on exchange rate dynamics transmission processes, we focused only on explaining the transmission mechanism between single variables, which was not completed. The likelihood that transmissions of various endogenous variables have interlocking effects and interactive complexities is high; thus, to providing a complete explanation would be extremely difficult. Finally, by expanding the settings for elasticity of substitution between home and foreign goods and including issues such as capital mobility and government consumption spending in our model can be considered the objectives for future research.
Tanzi (1980) proposed an analysis approach based on the demand for currency equation. On the basis of the view that changes in currencydemand are the result of underground economies, this approach builds on the one by Gutmann (1977). To estimate the demand for currency equation and to calculate the size of the underground economy, it uses a set of explanatory variables that includes variables considered to be related to the underground economy. Tanzi (1980) reported that underground economies are 2%~7% the size of aboveground economies.
In this study, the effects of economic sanctions and speculative attacks on creating currency crisis have been investigated in Iranian economy during recent years. Economic sanctions can lead to currency crisis through trade barriers and restrictions on financial transactions and also speculative attacks can stimulate currency crises. According to the important of this issue, new model of currency crisis introduced based on Neo-Keynesian framework in Iranian economy. Also, the stock of foreign assets that held domestically is estimated using money demand equation with ratchet mirrors. Iranian holdings of US dollar assets estimated using DOLS approach. MRS- GARCH is used to capture dynamics of speculative attacks and Beta-Skew-t-EGARCH model is used to generate economic uncertainty variable using exchange rate, interest rate, inflation and economic growth variables. The results of model estimation based on CCR approach indicate that economic sanctions and speculative attacks have positive and significant effect on currency crisis.
Though livestock trade policies had only a minor influence on trade patterns, economic policies in general were more important. A number of changes that occurred throughout Sub-Saharan Africa, both in geographical patterns of trade and in numbers of animals traded as well, appeared to be linked with local fluctuations in demand. These fluctuations either discouraged, as was the case in Ghana in the 1970s and in Nigeria and South Africa in the 1980s, or stimulated cross-border cattle trade, as was the case in Ivory Coast in the 1970s, and could be attributed to national economic policies on the one hand and to more general economic circumstances related to the country's position on the world market, on the other. Policies related to currency exchange rates have especially influenced geographical patterns and volumes of cross-border cattle trade as has been illustrated by the temporary reversal of flows between Tanzania and Kenya in 1993/94, and the changes in trade following the CFA franc devaluation in early 1994. The former only corresponds to a temporary modification of a familiar geographical pattern. The latter seems to have at least partially restored a colonial trade flow to Ghana, clearly linked with this country's successful economic recovery. The question whether trade was created or diverted in this particular case is more difficult to answer. Declining imports of European Union's frozen meat in Ivory Coast as a result of higher import prices, increased demand for Sahelian meat and resulted in creation of cross-border trade. However, the temporary shortage from which slaughterhouses in the Sahel suffered at the same time, leads to the hypothesis that trade was at least partially diverted from local to more remote markets across the border. In addition to the CFA franc devaluation, the reduction of subsidies by the European Union, under pressure of European public opinion, on its exports of frozen meat to West Africa contributed to declining imports.
In countries like India, which were combating the challenge to curb corruption, took a major step of demonetization. After this, it became difficult for India to consider the acceptance of cryptocurrency and it led to illegal considerations of this digital currency. Likewise, restrictions and ban were made upon the usage of cryptocurrencies in various other nations. People also lost trust in cryptocurrencies due to frauds mentioned in the paper. Already investors are putting their money in some other new form of asset and the resultant number of frauds led to a decrease in its demand. Various activities across the globe have also influenced and impacted subjects related to trade tensions, central banks harshening up their policies, and Brexit referendum making a notable contribution to the dwindling market liquidity.
As of 2005, throughout the entire distribution network, there is one central vault of the issue treasury which consists of 15 key vaults, and 32 provincial sub-vaults. There are 335 central branch vaults and 1,393 branch vaults nation- wide for a total of 1,775 currency issue related vaults, which are also internal distribution centers of the PBOC and are integrated on the same currency circu- lation management information system, Zhang . Though the exact volumes are not known, it is likely the largest volumes of banknotes are transported to the five prominent state-holding banking institutions, the Bank of China, China Construction Bank, China Industrial Commercial Bank, Bank of Communica- tions, and China Agricultural Bank. All of these except for China Agricultural Bank are now publicly traded companies. Safety reserve (stock) levels within the distribution system are typically very high compared to other countries. According to our investigation, safety reserve requirements dictate that enough currency to satisfy at least two years of currency issuing demand must be on stock at all times, though which levels of distribution this is mostly held at is unclear. At this level, there would only be 1/2 of a turn of currency stock per year on average. Given the issue of currency 2007 was 82.8 trillion RMB (about $12 trillion USD) this would imply that safety stocks would be massive to keep up with such high demand.
As of 2005, throughout the entire distribution network, there is one cen- tral distribution center, 15 regional distribution centers, and 32 provincial dis- tribution centers. For the payment distribution centers there are 335 central payment distribution centers and 1,393 local payment distribution centers na- tionwide  for a total of 1,775 currency-related distribution centers. Though the exact volumes are not known, it is likely the largest volumes of banknotes are transported to the four prominent state-owned banking institutions, the Bank of China, China Construction Bank, China Industrial Commercial Bank, and China Agricultural Bank. Safety reserve (stock) levels within the distribution system are typically very high compared to other countries. According to , safety reserve requirements dictate that enough currency to satisfy at least 24 months of currency issuing demand must be on stock at all times, though which levels of distribution this is mostly held at is unclear. At this level, there would only be 1/2 of a turn of currency stock per year on average. Given the net in- crease in M 0 over 2007 was 652 billion RMB (about $80 billion USD) this would imply that safety stocks would be massive to keep up with such high demand.
According to S.Gray (2006), excess reserves are described the position of most developed country central banks: the Bank of England, the US Federal Reserve Bank, the European (System of) Central Banks and the Bank of Japan. In addition, it could be the case that the surplus is represented by excess cash in circulation (supply is greater than demand) rather than by commercial bank balances at the central bank; this is unlikely although it can be observed in a few countries. In case of Jordan, this is the case of excess cash. On the other hand, cash is on deficit as the percentage of GDP Regarding reserve money which contains currency and reserves in central bank of Jordan, issued currency composed the major part of reserve money during the period (2013-2015) and approximated 60% on average. Issued currency increased from 3559 Jordanian million dinars in 2012 to 4336 Jordanian million dinars in 2015 and reserve money as well increased from 5229 Jordanian dinars in 2013 to 7505 Jordanian dinars in 2015.
This is a Keynsian mathematical model that includes the demand for foreign currency and the interest rate abroad in the IS. Phenomena that sometimes is present in developing countries. As a result, we got an IS more vertical than the normal or Keynsian case, and in the LM curve the interest rate outside the country is a shift factor. In the balance of payments equation with flexible exchange rates, we estimated that the remittances sent from abroad cause a sift factor in the BP curve. We conclude that the demand for foreign currency, remittances and flexible exchange rates makes fiscal policy less effective than the standard model in changing the level of income, where there is some degree of capital mobility.Developing countries need to create their own models to apply economic policies specially monetary and fiscal policies to get better result in growth for the wellbeing of their people.
The limitations of domestic gold standard are aggravated if extended to international arena. Its international component is concerned with the external value of a currency. The denarists believe that linkage with gold can ensure its stability, while Mansor (2006) seems to support them by implication. Logic and history both negate their conclusions. It may be useful to begin with the reiteration that the domestic gold standard was part of the evolution of money, not the result of ‘invention’. For, its extension to external transactions too was part of the same natural process. When gold coins constituted most of the money supply in two countries, there was little room for variations in the exchange rate between them. So long as bank deposits in the two countries A and B were freely convertible into gold at fixed prices, the exchange rate between them could not vary from their mint parity by more than the small margin of what were called the gold points. Any demand for foreign currencies that could not be met in the foreign exchange market at a rate within say 0.5 percent on either side of the mint par was shunted out to the gold market. Thus, the demand for any currency in the foreign exchange market always equaled its supply. The gap was covered by the gold movement between the two countries. Figure 2 explains the automatic nature of the balancing mechanism.
Where M and M’ are currency notes and demand deposits respectively, V and V’ are Velocities (or average turnover) of money respectively of currency notes and demand deposits, P is composite price index of existing and newly produced goods and T is volume of transactions. In this approach, the estimated PT is divided by the observed income to GNP ratio to get the size of black economy where observed income is the product of price index of newly produced goods and real income of the economy. He formulized that the derived nominal GNP and official GNP are the same in the absence of black economy. Tanzi (1980, 1983) formulated his methodology based on Cagen’s (1958) work. Cagen explained that the long run behavior of currency-money supply-ratio depends upon expected real per capita income, volume of retail trade, volume of travel per capita, degree of urbanization and tax rate on transactions. According to him, the higher the tax rates, the more the transactions made by currency payments to avoid reporting to tax collector. Tanzi (1980) re-hypothesized the same link between tax rate and currency-money supply ratio to obtain the alternative estimates of US black economy. He assumed that currency is used to carry out transactions in the black economy and high taxes are the forces behind the size of black economy. Tanzi (1980, 1983) postulated the currency in circulation to money supply ratio ( C M 2 ) as a function of top bracket statutory tax rate, weighted average rate on interest income, ratio of personal income tax to personal income net of transfers ( ) Ti' s , share of wages and salaries in national income ( ws ni ) , interest rate ( ) r and per capita income ( ) Y p . The expected signs for both Y p and