Threshold Relationships Among Inflation, Financial Market Development and Growth
22 Pages Posted: 7 Nov 2005
Date Written: May 12, 2001
Abstract
This paper tests for and estimates single-equation non-dynamic panel threshold relationships among inflation, financial market development (FMD) and growth. This trivariate relationship changes across a sttistically robust inflation threshold of about 14%. Below 14%, the relationship between growth and FMD is positive; above 14%, the relationship between growth and inflation is negative. The interaction between FMD has a significant impact however: below 14% there is a positive correlation between growth and inflation, but marginal increases in inflation impair the relationship between growth and FMD; above 14% marginal increases in inflation have little or no impact on this relationship.
Keywords: Growth, Financial Market Development, Inflation, Thresholds, Financial Intermediation Channel
JEL Classification: C4, E5, E6, G2
Suggested Citation: Suggested Citation
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