An Econometric Approach on Money Laundering and Its Impact on Economic Growth (A Study of Pakistan)

Abstract

Money laundering is not the issue of today, as it is coming from the early days in many ways and the evil to society as it effects not only those peoples which are related to this evil as well as it also hits the noble peoples of the society by not paying the legal levies that increases the prices of products in the market. Research is carried out to check the impact of money laundering on the economy of Pakistan in an econometric way along with the other control variables (inflation, unemployment, remittances, number of crimes, total investment, and corruption). Money laundering is measured with informal economy and economic growth is measured with GDP. Annual data from 2000 to 2019 is employed for the purpose of analysis and suitable statistical tools are applied to derive the results. Through these test short run and long run effects are derived also. For analysis of the data, secondary data of two recent decades are used which is collected from the different sources i.e. economic surveys, published papers, and World Bank database etc. At the end it is concluded that money laundering has negative effect on the economy of Pakistan along with other variables.