Estimating the Volume of Underground Economy and its Asymmetric Impact on Energy Consumption in Iran

In the present study, an attempt has been made to test the type and effectiveness of energy consumption from underground economy. For this purpose, initially the volume of underground economy was estimated based on Tanzi approach and using data and information in the period 1978-2019. Then, in order to study and experimentally analyze the effects of the underground economy and other variables on energy consumption in the Iranian economy. The autoregressive distributed lag (ARDL) and nonlinear autoregressive distributed lag (NARDL) was used. Findings from estimating the symmetric (linear) model in the long run show that the underground economy is not associated with a significant effect on energy consumption, but nonlinear estimation indicates the asymmetric effect of the underground economy on energy consumption. In a way that increases in the underground economy are not associated with a significant effect on energy consumption and reductions have the indirect effect and with a one percent decrease in the volume of the underground economy, energy consumption increases by 0.31 percent. In both symmetric and asymmetric model, real energy prices have an adverse effect on energy consumption. Urbanization rates are also expected to have a direct effect on energy consumption. Based on the results, it is suggested that policymakers try to reduce the volume of the underground economy by adopting appropriate policies and promoting the level of economic transparency. It is also suggested to pay attention to the asymmetric effect of this factor on energy consumption in energy pricing.