Access Type

Open Access Dissertation

Date of Award

January 2020

Degree Type


Degree Name




First Advisor

Li Way Lee


The shadow economy (SE), as unreported economic activity, is a challenge for researchers and policymakers worldwide because of its size, consequences for economic development, and the difficulty of evaluating it. This dissertation makes an original contribution to SE research by estimating the size of the shadow economy in Saudi Arabia for the period 1975–2018.

This dissertation uses a modified version of the most widely used method currently available for SE estimation: the Currency Demand Approach (CDA). This approach focuses on identifying excess cash used in an economy not accounted for in the official statistics on the assumption that shadow activities are mostly conducted in cash.

Ours is the first study using the CDA that covers the entire period under study in Saudi Arabia. It is also the first study that hypothesizes and substantiates the significance of a combination of government spending, money outflows, intensity of regulation, inflation, taxes, GDP, and the SARIE digital banking system in determining the extent of excess cash demand and, hence, the shadow economy in Saudi Arabia.

The results of this study are consistent with the findings of the best research done on developing and developed countries, including Saudi Arabia and other MENA countries with significant oil and gas exports. Our results are more refined because they take into account the special features of the Saudi economy, including a very large foreign workforce, the importance of its energy economy to the world, and a history of government planning.

The research imperative of this dissertation is to better understand the SE in Saudi Arabia in order to improve its productive management by policymakers. This includes a more detailed view of the SE dynamics, and the factors that drive those dynamics, than previous studies have achieved. These previous studies have examined the impact of limited common factors on SE in Saudi Arabia among other countries over more important and determinative factors found in the present study.

Included in

Economics Commons