In this paper, a method of estimating the unrecorded part of the GNP based on a modified RESET procedure applied to a currency demand equation is proposed. The model passes all standard diagnostic tests and the estimates of the unrecorded economy provide plausible answers when used as a proxy for the tax-evaded income. The method is easily applicable to most countries with minor modifications.
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D. K. Bhattacharyya (1990) studied this question.
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