This paper highlights the size of the Greek shadow economy after the introduction of capital controls in June 2015. I estimate the size of the shadow economy using one of the most common methods, the multiple indicators multiple causes (MIMIC) approach. In doing so, I undertake three different specifications to capture the effect of capital controls on the Greek shadow economy. My findings indicate that indeed the capital controls have a negative effect on the shadow economy yet, their relative importance is small compared to other macroeconomic indicators, such as direct and indirect taxes or self employment. To the best of my knowledge, this is the first study to estimate the size of the informal sector in Greece after capital controls.
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