Journal Published Online: 04 December 2020
Volume 49, Issue 4

Asymmetric Impact of Inflation to Financial Development

CODEN: JTEVAB

Abstract

Because of financial frictions and asymmetric information, inflation impacts financial development uncertainly. These findings are empirically tested within a factor-augmented dynamic panel threshold regression model. This study provides a comparative study on the threshold effects of inflation on financial development between advanced countries and underdeveloped countries. The findings of the study indicate evidence of the existence of a robust threshold of inflation in both sample countries, suggesting that low inflation is development enhancing for the sample of developing countries but impedes financial development for the advanced countries to a certain degree. However, inflation above the minimum level is a hinderance to financial development for all countries considered. The study therefore argues inflation suppressing policies should be the focus in monetary policy to develop the financial sector.

Author Information

Wu, Jin-Shun
School of Economics and Management, East China Jiaotong University, Nanchang, Jiangxi, China
Pages: 17
Price: $25.00
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Details
Stock #: JTE20200216
ISSN: 0090-3973
DOI: 10.1520/JTE20200216