In this paper we investigate the role of …nancial development, or more widespread access to …nance, in generating economic growth in four Latin American countries between 1980 and 2007. The results, based on panel time-series data and analysis, con…rm the Schumpeterian prediction which suggests that …nance authorises the entrepreneur to invest in productive activities, and therefore to promote economic growth. Furthermore, given the characteristics of the sample of countries chosen, we highlight not only the importance of a more open, competitive and therefore active …nancial sector in channelling …nancial resources to entrepreneurs, but also the relevance of macroeconomic stability (in terms of low in ‡ation rates), and all the institutional framework that it encompasses (central bank independence and …scal responsibility laws), structural reforms which were implemented in the 1990s, as necessary pre-conditions for …nancial development, and consequently for sustained growth and prosperity in the region.

We examine the impact of inflation on financial development in Brazil, and the data available permit us to cover the period between 1985 and 2004. The results-based initially on time series and then on panel time series and panel data and analyses-suggest that inflation presented deleterious effects on financial development during the period investigated here. The main implication of the results is that poor macroeconomic performance has detrimental effects to financial development, a variable that is important for affecting, (e.g., economic growth and income inequality). Therefore, low and stable inflation, and all that it encompasses, is a necessary first step to achieve a deeper and more active financial sector with all its attached benefits.

The main objective of central banks around the world is the achievement and maintenance of price stability, which actually creates an environment conducive for faster economic growth. Therefore, it is important for policy makers to understand the relationship between inflation and economic growth in order to make sound policies. If inflation is detrimental to economic growth, then policy makers should aim for low rates of inflation. This leads to a question; how low should the inflation rate be? Previous research in the non-linearities of the inflation-growth relationship has found that a positive relationship exists when the in-flation rate is low and a negative relationship when the inflation rate is high. This implies the existence of a threshold level of inflation at which the sign switches. In this paper we use panel data for the period 1980-2008 to examine the inflation-growth nexus in the Southern African Development Community (SADC) re-gion and to endogenously determine the threshold level of inflation. To deal with problems of endogeneity and heterogeneity, the paper uses the Panel Smooth Transition Regression (PSTR) method developed by González et al. (2005) to examine the non-linearities in the inflation-growth nexus. This technique further estimates the smoothness of the transition from a low inflation to a high inflation regime. The findings reveal a threshold level of 18.9%, above which inflation is detrimental to economic growth in the SADC region.

No abstract

Using a standard overlapping generations monetary production economy, faced with endogenously determined tax evasion by heterogeneous agents in the economy, we provide a theoretical model that indicates that both a lower (higher) level of financial development and a higher (lower) level of inflation leads to a bigger (smaller) shadow economy. These findings are empirically tested within a panel econometric framework, using data collected for 150 countries over the period 1980−2009 to enable a broad generalisation of the results. The results support the developed theoretical model, even after having accounted for the differences in the levels of economic development, the level of institutional quality that includes different tax regimes and regulatory frameworks, central bank participation in the economy as well as different macroeconomic policies.JEL Classification: C61, E26, P16 Keywords: Informal economy, financial development, inflation. * We would like to thank two anonymous referees for many helpful comments that tremendously improved the quality of the paper. However, any remaining errors are solely ours.

In this paper we investigate the role of in ‡ation rates in determining economic growth in …fteen sub-Saharan African countries, which are all members of the Southern African Development Community (SADC), between 1980 and 2009. The results, based on panel time-series data and analysis (we use the Fixed E¤ects and Fixed E¤ects with Instrumental Variables estimators to account for heterogeneity and endogeneity in thin panels), suggest that in ‡ation has had a detrimental e¤ect to growth in the community. We highlight that in ‡ation has o¤set the Mundell-Tobin e¤ect and consequently reduced the much needed economic activity in the community, and also the importance of an institutional framework conducive to a stable macroeconomic environment as a precondition for development and prosperity in the community.

We examine the impact of …nancial development on earnings inequality in Brazil in the 1980s and …rst half of the 1990s. The evidencebased initially on time-series, and then on the relatively novel panel time-series data and analysis-shows that …nancial development had a signi…cant and robust e¤ect in reducing inequality during the period. We suggest that this is not only because the poorer can invest the acquired credit in either short or long-term productive activities, but also because those with access to …nancial markets can insulate themselves, via a process of …nancial adaptation, against recurrent poor macroeconomic performance, which is exempli…ed in Brazil by high rates of in ‡ation. The main implication of the results is that a deeper and more active …nancial sector alleviates the high inequality seen in Brazil without the need for distortionary taxation.

In this paper we investigate the role of poor macroeconomic performance, in terms of high rates of in ‡ation, in determining economic growth in four Latin American countries between 1970 and 2007. The empirical results, based on the relatively novel panel time-series analysis, con…rm the anecdotal evidence which suggests that in ‡ation has had a detrimental e¤ect to growth in the region. All in all, we highlight the costs that in ‡ation has had on economic activity, and also the importance of particular economic institutions which were implemented in the 1990s-central-bank independence and …scal responsibilities laws-in actually keeping in ‡ation under control in the region, as a …rst step in the direction of sustained growth and prosperity.