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Up to now a country-specific study on Qatar with respect to underground economy, illegal money and tax evasion has not been undertaken. This paper aims to contribute by separately estimating the magnitude of the underground economy in Qatar from 1980 to 2010 using adjusted currency demand function.

The study uses the Zivot–Andrews unit root test for the stationarity analysis and applies the Gregory and Hansen long run cointegrating technique for estimating the underground economy based on the latest form of the currency demand function model. While the general to specific technique is used to estimate the short run error correction model.

The results show that the average size of the underground economy in Qatar is about 17.03 per cent of the official gross domestic products (GDPs). The average level of tax evasion as a per cent of the total non-oil tax revenues is estimated at around 16.50 per cent and is about 2.12 per cent of the official GDP. The average level of illegal money to the total money from banking sector is estimated at 26.70 per cent.

This study is the first to separately estimate the extent of the underground economy, illegal currency and tax evasion in Qatar. It overcomes the methodological errors and spurious estimation problems encountered in the previous studies that included Qatar with other countries based on cross-country data without taking into consideration the economic differences between countries. The authors believe that the findings may help the government of Qatar to re-formulate its economic policies, thus, enabling it to curb the growing underground economic activities.

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

This paper aims to examine the stability of the currency demand function for India with private consumption expenditure, tax–gross domestic product ratio and deposit rate as explanatory variables for the period 1996:1 to 2014:4. Additionally, this paper also tries to detect the presence of endogenous financial innovation in the currency demand function.

For the theoretical foundation of the study, this paper has used a modified version of money-in-the-utility function. To examine the stability of currency demand function empirically, seasonal cointegration technique developed by HEGY (1990) and EGHL (1993) was applied. Finally, to detect the presence of endogenous financial innovation in the currency demand equation, the Gurley and Shaw (1960) hypothesis was tested by presenting the currency demand equation in a state–space form.

The empirical findings show that there is the absence of long-run cointegrationg relationship among the variables at the zero and annual frequency; however, there is evidence of a relationship among the variables at the biannual frequency. Moreover, the time-varying coefficient of deposit rate elasticity, used to test the Gurley–Shaw hypothesis, suggests that innovations in financial markets, especially improvements in the payment technology, raise the deposit-rate elasticity, beginning from 2010 onward.

The empirical results of the paper suggest that there would be shrinkage of currency demand in future. From the monetary policy angle, the Reserve Bank of India needs to adapt adequately to a situation of shrinking demand for currency.

Apart from using seasonally unadjusted data to examine currency demand function for India, this study, for the first time, and to the best of the authors’ knowledge, tries to test the evidence of financial innovation in India by testing the Gurley–Shaw hypothesis. The findings of the study will have significant implication in the planning of the issue and distribution of currency in the fast-changing economic environment.

This paper aims to investigate the presence of currency substitution in eight African countries.

This study investigates the presence of currency substitution in eight African countries – Egypt, Morocco, Nigeria, Ghana, Kenya, South Africa, Tunisia and Zambia – for the period 1976 to 2005 using both regional and US dollar as anchor currencies.

The paper finds that currency substitution is prevalent in Ghana and Nigeria when CFA franc is used as an anchor currency. However, when US dollar is used as an anchor currency there is no evidence of currency substitution in Ghana, but the presence of currency substitution in Nigeria is still observed. The paper also finds the presence of currency substitution in South Africa, but not in Egypt when the US dollar is the anchor currency. For Kenya, Tunisia and Zambia there is no evidence of currency substitution irrespective of the anchor currencies considered. In the case of Morocco, no evidence of currency substitution is observed when the Egyptian pound is used as anchor currency, but there is weak evidence of currency substitution when the US dollar is considered.

This paper provides useful information on the presence of currency substitution in African countries.

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

The purpose of this paper is to examine the likely determinants of the demand for official international reserves (hereafter reserves) for India and China in the long run in a basic buffer stock model. The paper also examines the role of domestic money market disequilibrium in the short-run demand for official reserves for both the countries in a dynamic synthesis model.

The study used quarterly data for the time period 1993:Q1–2015:Q4. The long-run model is being estimated by following the Frenkel–Jovanovic (1981) buffer stock model and includes the determinants such as transaction motive variable (GDP or Imports), opportunity cost variable (domestic interest rate), precautionary motive variable (volatility of reserves) and exchange rate. The study also examined the role of domestic money market disequilibrium in addition to the above variables in the short-run reserve demand model. The money market disequilibrium term is expected to be negative and significant in the short run. The study employed autoregressive distributed lag bound testing approach to co-integration and unrestricted error-correction model (UECM) approach developed by Pesaran et al. (2001) for estimating the long-run and short-run models, respectively.

The co-integration test suggests the existence of long-run relationship between international reserves and its determinants. In the long run, all the variables are statistically significant with expected sign, except domestic interest rate variable for China. It is also found that, the money market disequilibrium term in the short run is negative and significant which validates that an excessive money demand (supply) induces an inflow (outflow) of international reserves for both India and China with a lag of four quarters. The recursive residual tests (CUSUM and CUSUMSQ) confirm the stability of both long-run and short-run reserve demand models.

The findings and policy implications of this study may be useful for the policy makers of the similar emerging economies for designing money and currency policies.

This paper is a comparative study which systematically analyzed the reserve demand behavior of the two emerging economies India and China. The study integrates the domestic money market with the international reserve demand behavior for these two economies.

After the 2008 global financial crisis, the world has been through an improving economic integration. The scale of RMB cross-border transaction flows expands as well. Countries around China are gradually accepting the RMB as a means of trading and investing. Nowadays, the phenomenon of RMB substitutes the currencies of neighboring countries has become more and more widespread. As a frontier region for China's opening up to the outside world, Hong Kong's financial market is highly transparent with perfect infrastructures. The completion of the Hong Kong offshore RMB market leads to a rise of the RMB stock in Hong Kong, so there is a clear phenomenon of RMB substituting Hong Kong dollars (HKDs) in Hong Kong. This paper studies the substitution effect of RMB and HKD from both theoretical and empirical aspects, and puts forward policy recommendations based on the research results.