The Size of Underground Economy in Albania

Abstract

The main purpose of this paper is to assess the size of the underground sector of the economy in Albania by using the Indirect Approach - Currency Demand Approach. A few studies have tried estimate the size of the informal economy in Albania in the previous years and there’s no evidence of recent estimates of informality. Also, there are some other available studies which give some point assessments of informality in Albania but without information on its development over time. Using indirect measurement approaches we found that the size of the underground economy still accounts for a large share to GDP, but there is a decrease in size on the last years. This may be the result of vast reforms and a formalization process undertaken by the Albanian governments over time. Despite these results, it’s important to highlight the fact that the average ratio of the underground economy to GDP presents a declining trend over the period 1998 – 2013.

DOI: 10.5901/ajis.2014.v3n4p503