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

by Gabriela Guibourg and Björn Segendorf

March 2007

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 classifications

E41; E26; H26