Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 204: The Use of Cash and the Size of the Shadow Economy in Sweden

Gabriela Guibourg () and Björn Segendorf ()
Additional contact information
Gabriela Guibourg: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Björn Segendorf: International Secretariat, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: We use an “unexplained demand for cash” approach to measure the size of the shadow economy in Sweden. The size of the shadow economy is found to have increased from 3.8 to 6.5 per cent of GDP from 1990 to 2004. This result is also supported by our finding of an increased residual between households’ recorded disposable income and their consumption, investments and changes in net financial positions. Moreover, the correlation between the demand for cash that cannot be explained by recorded transactions and this residual is strong.

Keywords: Cash use; demand for cash; shadow economy; National Accounts; Financial Accounts

JEL-codes: E26; E41; H26

16 pages, March 1, 2007

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