Empirical Analysis of Money Laundering Shocks on Economic Growth, Government Expenditure and Income Inequality in IRAN

Money laundering as an important financial offence can decrease government controls on economic policies، economic growth، economic development and other relevant areas. In this paper by defining two indices for money laundering، the effects of money laundering shocks on macroeconomic variables (economic growth، income inequity، and government expenditure) have been evaluated by the Vector Auto Regressive (VAR) Method during 1984-2009. Results of the VECM method show an increase in money laundering indices (the rate of crime and number of black markets) can decrease economic growth، raise income inequity and government expenditure in the Iranian economy.