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

Barnes, Michelle L., Threshold Relationships Among Inflation, Financial Market Development and Growth (May 12, 2001). Available at SSRN: https://ssrn.com/abstract=842646 or http://dx.doi.org/10.2139/ssrn.842646

Michelle L. Barnes (Contact Author)

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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