Abstract
AbstractThis paper uses a Real Business Cycle (RBC) model to analyse and simulate the effect of a negative oil‐price shock on the informal sector in Nigeria. Secondly, the paper shows that RBC theory can account for the size of the informal sector as produced by the Multiple Indicator Multiple Cause (MIMIC) model. The MIMIC model has been criticised for generating estimates of the informal sector without an underlying theory. This paper shows that the model's estimates of the informal sector can be supported by theory.
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