Money Laundering in a Two Sector Model: Using Theory for Measurement

24 Pages Posted: 7 Sep 2008

See all articles by Amedeo Argentiero

Amedeo Argentiero

University of Rome Tor Vergata, Department of Economics; Institute for Studies and Economic Analyses (ISAE)

Michele Bagella

University of Rome Tor Vergata - Faculty of Economics

Francesco Busato

Aarhus University - School of Business and Social Sciences

Date Written: September 5, 2008

Abstract

This paper implements a methodology that exploits firms and households' optimality conditions to measure money laundering for the Italian economy. This approach, first implemented by Ingram, Kocherlakota, and Savin (1997) to the household production sector, and by Busato, Chiarini and Di Maro (2006) for measuring the underground economy, allows to generate high frequency series for the money laundering using a theoretical two-sector dynamic general equilibrium model calibrated over the sample 1981:01-2001:04. The analysis of the generated series suggests two main results. First, money laundering accounts for approximately 12 percent of aggregate GDP; second, money laundering is more volatile than aggregate GDP, and it is negatively correlated with it.

Keywords: Money Laundering; Two-sector Dynamic General Equilibrium Model; Illegal Economy

JEL Classification: E26, E32, K40

Suggested Citation

Argentiero, Amedeo and Bagella, Michele and Busato, Francesco, Money Laundering in a Two Sector Model: Using Theory for Measurement (September 5, 2008). CEIS Working Paper No. 128, Available at SSRN: https://ssrn.com/abstract=1263945 or http://dx.doi.org/10.2139/ssrn.1263945

Amedeo Argentiero

University of Rome Tor Vergata, Department of Economics ( email )

Rome, I-00133
Italy

HOME PAGE: http://www.amedeoargentiero.com

Institute for Studies and Economic Analyses (ISAE) ( email )

Piazza dell' Indipendenza 4
I-00185
Italy

HOME PAGE: http://www.amedeoargentiero.com

Michele Bagella

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

Francesco Busato (Contact Author)

Aarhus University - School of Business and Social Sciences ( email )

Building 350
DK-8000 Aarhus C
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

HOME PAGE: http://www.econ.au.dk/afn

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