ESTIMATION OF UNDERGROUND ECONOMY IN NORTH CYPRUS: NEW RESULTS WITH MIMIC MODEL APPROACH AND BRIEF MODEL COMPARISONS

Hasret Benar Balcioglu

ESTIMATION OF UNDERGROUND ECONOMY IN NORTH CYPRUS: NEW RESULTS WITH MIMIC MODEL APPROACH AND BRIEF MODEL COMPARISONS

Hasret Benar Balcioglu

Abstract

This study measures the informal economy of North Cyprus (NC) by using the MIMIC Model Approach. The data, picked up from the website of the North Cyprus State Planning Organization, start from 1977 and go to 2015. Because North Cyprus is a small island, the applicability of different models are discussed and compared. As a conclusion, dynamic MIMIC Model approach has been found to be the most efficient model and the results obtained by using Lisrel 8.7 indicate that if there is an increase in unemployment rate, inflation rate, per capita electricity consumption, total tax revenue ratio, and the number of self-employed people, the informal economy responds to the increase as a rise. On the other hand, there is a negative relationship between the growth rate of employment and real GNP and the informal economy.

Keywords

Informal Economy; Lisrel 8.7; MIMIC Model; Model Comparisons; North Cyprus

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