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The Size and Development of the Shadow Economy in Morocco

Author

Listed:
  • Lahlou, Kamal

    (Bank Al-Maghrib, Département de la Recherche)

  • Doghmi, Hicham

    (Bank Al-Maghrib, Département de la Recherche)

  • Schneider, Friedrich

    (Johannes Kepler University of Linz)

Abstract
The objective of this paper is to estimate the size of the shadow economy in Morocco over the period 1988-2018. The CDA and MIMIC approaches are used while taking into consideration variables that reflect the features of the Moroccan economy such as the importance of currency in circulation, the size of the agricultural sector and the financial development process. Our results show that the evolution of the shadow economy exhibits three distinct periods: (i) over the first period 1988-1998, it is almost stagnant at around 40% of GDP; (ii) during the second period 1999-2008, it decreases to 32% -34% of GDP; (iii) during the last period 2009-2018, the declining trend is continuing but at a more moderate pace, to reach a level just below 30% of GDP. These results suggest that the strategies implemented by national authorities since the early 2000s to improve the institutional, economic and financial environment contributed to reducing the size of the shadow economy. However, the persistence of important shadow activities requires additional structural reforms particularly those related to education, judiciary system, tax policy and labor market.

Suggested Citation

  • Lahlou, Kamal & Doghmi, Hicham & Schneider, Friedrich, 2020. "The Size and Development of the Shadow Economy in Morocco," Document de travail 2020-3, Bank Al-Maghrib, Département de la Recherche.
    • Handle: RePEc:ris:bkamdt:2020_003
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    References listed on IDEAS

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    Cited by:

    1. Chafik, Omar, 2021. "Impôt sur les sociétés et investissement : quel lien au Maroc ?," Document de travail 2021-4, Bank Al-Maghrib, Département de la Recherche.

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    More about this item

    Keywords

    Shadow economy; MIMIC model; currency demand approach; financial development; structural reforms; Morocco;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P11 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Planning, Coordination, and Reform

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