TITLE:
The Proliferation of the Informal Sector in Sub-Saharan Africa: Is Inflation Also in the Dock?
AUTHORS:
Philémon Nsi Ella, Jean Felix Mabiala
KEYWORDS:
Inflation, Informal Economy, SSA, Hausman Test
JOURNAL NAME:
Theoretical Economics Letters,
Vol.14 No.6,
December
26,
2024
ABSTRACT: The empirical literature on the economic consequences of inflation is abundant. However, the response of the informal sector in Sub-Saharan Africa (SSA) seems to have been ignored. The aim of this article is to analyze another neglected effect of inflation by assessing its impact on the informal economy in Sub-Saharan Africa (SSA). To achieve this, we use data from 27 countries over the period 2000-2018. Least squares estimation revealed that inflation amplifies the proliferation of the informal sector. This result is validated by the random effects method following the Hausman test. As a result, the monetary policies of central banks need to be adjusted to identify the source of inflation, with a view to providing a targeted solution. In addition, the government should continue to combat the black economy through effective programmes.