AbstractThe primary aim of this study is to assess the magnitude of the shadow economy (SE) in Malaysia through the lens of public expenditure during the period from 1970 to 2022, employing the modified currency demand approach introduced by Pickhardt and Sarda (2006). Using the autoregressive distributed lag (ARDL) technique to estimate the Currency Demand Function Model (CDFM), the findings reveal that the SE accounts for an average of 24.225 percent of Malaysia_s official GDP over the study period, with its size ranging between 22.435 percent and 25.741 percent. Moreover, the application of the non-linear ARDL technique highlights that both positive and negative changes in the SE are positively linked to economic growth in the short and long term. However, the long-term effects of positive SE shocks on economic growth are found to be more significant compared to the impacts of negative shocks. Additionally, the results establish a _U-shaped_ relationship between public expenditure (PE) and .....