The shadow economy includes both the activities of the informal sector that are legitimate, unregistered and not subject to supervision, in addition to the illegal activities (hidden or black sector) that include goods that are prohibited from trading and prohibited for use and dealing. The research aims to study the phenomenon of the shadow economy in Iraq and measure its causal relationship with some macroeconomic variables (national output, unemployment, inflation, tax revenues, average per capita income, and money supply) in order to address the problems resulting from the impact of the shadow economy on the structure of the Iraqi economy to cause In distorting official statistics taken as a basis for planning, which leads to the formulation of inappropriate economic policies.