Inflation, Income Inequality, and Energy Poverty: Assessing the Moderating Role of Central Bank Independence in Sub-Saharan Africa

This paper contributes to the literature on inflation and income inequality by bringing the issue of energy deprivation into the picture. The study assesses the interconnections between inflation, energy poverty, and income inequality across SSA countries while accounting for the potentially moderating role of CBI in a panel of 24 countries spanning from 2005 to 2022. We employ Driscoll-Kraay fixed effects and Method of Moments Quantile Regression (MMQR) estimators to control for cross-sectional dependence and distributional heterogeneity in the data. The results show that inflation significantly increases income inequality, stressing its regressive effects in the region. In turn, higher income inequality is found to exacerbate energy poverty by reducing households’ access to clean fuels and modern energy technologies. Institutional governance consistently reduces inequality and improves energy access, emphasizing its importance in development outcomes. Central bank independence plays a dual role: while it is associated with lower average income inequality, it amplifies the inequality-increasing effect of inflation. However, its moderating effect on the inflation– energy poverty nexus is weak in mean regressions but becomes more relevant in highly deprived situations. The heterogeneity analysis reveals that these relationships vary across the distribution of inequality and energy poverty. The effect of inequality on energy poverty is stronger at lower and median quantiles, while institutional effects become more pronounced at higher deprivation levels.

Similarly, the role of central bank independence and inflation differs across quantiles, confirming substantial distributional asymmetries. These results suggest that macroeconomic stability, institutional quality, and energy access are deeply interconnected, and their effects are highly context-dependent. The study concludes that addressing inequality and energy poverty in Sub-Saharan Africa requires coordinated monetary, fiscal, and institutional policies that explicitly consider distributional heterogeneity.