Inflation and Financial Depth
International Monetary Fund, Apr 1, 2001 - Business & Economics - 31 pages
There is now a substantial theoretical literature arguing that inflation impedes financial deepening. Furthermore, it has been hypothesized that the relationship is a nonlinear one, in that there is a threshold level of inflation below which inflation has a positive effect on financial depth, but above which the effect turns negative. Using a large cross-country sample, empirical support is found for the existence of such a threshold. The estimates indicate that the threshold level of inflation is generally between 3 and 6 percent a year, depending on the specific measure of financial depth that is used.
What people are saying - Write a review
We haven't found any reviews in the usual places.
Other editions - View all
adverse selection agents bank lending Boyd and Smith Bruce coefﬁcient conﬁdence intervals credit markets credit rationing CSV problem d_adv deﬁned degree of openness dependent variable dummy variable Economic effect of inﬂation effect on ﬁnancial empirical endogenous equation estimation method existence of threshold external ﬁnance ﬁnancial depth ﬁnancial development ﬁnancial system ﬁnd ﬁndings frictions high activity steady higher rates increases in inﬂation indicators of ﬁnancial inflation inﬂation and ﬁnancial inﬂation and real instrumental variables Khan and Senhadji level of inﬂation level of real Levine long-run real activity measures of ﬁnancial moral hazard natural lenders NLLS panel PPP GDP problem in credit public consumption rate of inﬂation rate of money rates of return real growth real rates real returns relationship between inﬂation residual sum share of GDP stock market capitalization stock market development sum of squares three indicators threshold effects threshold estimate threshold level trend