The informal economy and inflation in Tunisia

Inflation is one of the serious macroeconomic problems.We are interested in studying the origins of inflation in Tunisia over the period 1988-2018 using an ARDL model. In particular we studied the effect of the informal economy on inflation in Tunisia. To do so we first estimated the size of the informal economy based on the Gutmann method. The results show that inflation in Tunisia is caused by fiscal pressure (fiscal policy) the increase in monetary variables (monetary policy) and the informal economy.