INFLATION AND FINANCIAL DEPTH

By Mohsin S. Khan, Abdelhak S. Senhadji, Bruce D. Smith. Macroeconomic Dynamics, 2001

192 citations recorded by the source corpus.

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 about 3–6 percent per annum, depending on the specific measure of financial depth that is utilized.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/ca12723769b9f287d19a268b95c3383615a070f2

Citations in the corpus

• Inflation and growth: new evidence from a dynamic panel threshold analysis (2009, unknown): “2 Similar nonlinear effects of inflation have been documented by Bick and Nautz (2008) for relative price variability in the US and by Khan et al. (2006) for financial depth in a large cross-country panel dataset.”
• Thresholds in the Finance-Growth Nexus : A Cross-Country Analysis (2011, unknown): “…inflation rates (e.g., below or above optimal threshold inflation as reported by Fischer, 1993, Bruno and Easterly, 1998, Khan and Senhadji, 2001, Khan et al., 2006, and Rousseau and Yilmazkuday, 2009), or development status (e.g., ‘developed’ vs. ‘developing’ status as reported by Rousseau and…”