Revisiting the role of inflation in financial development: unveiling non-linear and moderating effects

Ehigiamusoe, Kizito Uyi; Narayanan, Suresh; Poon, Wai Ching

doi:10.1108/apjba-04-2021-0171

Cited by 14 publications

(25 citation statements)

References 45 publications

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“…Consequently, it will lead to more demand for money for expenditure and production, resulting in inflation. In contrast, several studies look at the impact of inflation on financial development rather than the impact of finance on inflation (Ehigiamusoe and Lean, 2018;Ehigiamusoe et al, , 2020Ehigiamusoe et al, , 2021. For example, Ehigiamusoe et al (2021) analysed how inflation affected financial development in a panel of 125 countries over the 1981-2015 period.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In contrast, several studies look at the impact of inflation on financial development rather than the impact of finance on inflation (Ehigiamusoe and Lean, 2018;Ehigiamusoe et al, , 2020Ehigiamusoe et al, , 2021. For example, Ehigiamusoe et al (2021) analysed how inflation affected financial development in a panel of 125 countries over the 1981-2015 period. The researchers used credit to the private sector as a proxy for financial development and discovered that, while inflation had no effect on financial development in panel estimates, it does in country-specific estimates.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Using data from 1980 to 2014, the authors concluded that inflation has a detrimental impact on financial development in the West African region, and countries with higher inflation rates had less developed finance sectors. In a similar vein, Ehigiamusoe et al (2020Ehigiamusoe et al ( , 2021 investigated the relationship between inflation, economic growth and financial development, finding that inflation harmed financial development.…”

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 3 more Smart Citations

Does excessive degrees of financial depth push hyper-inflation?

Subramaniam

Masron²

2022

AJEB

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PurposeUsing an innovative threshold estimation technique, this paper provides new evidence on the relationship between finance and inflation with distinct levels of finance.Design/methodology/approachThe sample consisted of 10 high inflation countries using time series data for the period of 1992–2020. These 10 countries recorded the world's highest inflation rates in 2017.FindingsThe findings demonstrate that there is a threshold effect on the finance–inflation relationship. Whilst the effects of finance are consistently positive for below and above the threshold models, financial depth above the threshold tends to aggravate the inflation level.Practical implicationsThese results disclose that financial depth could be the cause of high inflation in the top 10 countries and thus, is not necessarily welcome as too rapid of a price increase may in turn reverse the prospect of economic growth. Searching and strategizing for the optimal level of financing is crucial in facilitating price stability and economic growth.Originality/valueThe authors believe that the effect of financial depth on inflation is characterised by being desirable to certain extent and undesirable if over-financing is beyond the optimum level. Therefore, in this study, the authors have introduced the threshold modelling as the potential strategy to connect financial depth and inflation.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Does excessive degrees of financial depth push hyper-inflation?

Subramaniam

Masron²

2022

AJEB

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“…(2021) also found gross domestic product (GDP) to have a significant positive impact on financial development for a panel of 125 countries. Similarly, Ehigiamusoe and Samsurijan (2021) and Ehigiamusoe et al. (2021) focused on assessing the moderating impact of institutional quality and macroeconomic stability on finance–growth nexus and the role of inflation on financial development respectively.…”

Section: Introductionmentioning

confidence: 99%

Financial development and institutional quality among emerging economies

Abaidoo

Agyapong

2022

JED

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PurposeThis study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).Design/methodology/approachEmpirical estimations verifying various relationships are performed using the limited information maximum likelihood (LIML) estimation technique.FindingsThe results suggest that institutional quality enhances the pace of financial development among economies in the sub-region all things being equal. In a further micro-level analysis where components of institutional quality index are examined separately, the study’s results suggest that effective governance, regulatory quality, rule of law and accountability tend to have a significant positive impact on financial sector development.Research limitations/implicationsFindings of the study suggest that policies geared towards improving governance and regulatory institutions can augment development of the financial sector among economies in SSA; governments and policymakers are therefore encouraged to resource noted institutions to play effective roles for the development of the financial sector.Originality/valueCompared to related studies, this study reorients existing paradigm, which emphasizes the role of governance and institutional variables in the economic growth discourse. The authors’ empirical inquiry rather focuses on how governance and institutional structures influence regional financial development dynamics. Specifically, this study differs from most macro-level studies found in literature because it examines the impact of hitherto unexamined governance and institutional variables on financial development among economies in SSA.

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Financial development in Africa: Do expenditure and population matter? Evidence through pooled mean group and generalized method of moments estimators

Kapaya

2023

J of Intl Development

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This article assesses the impact of government expenditure and population structure on financial development among selected African economies for a panel of 37 selected African economies from years 1980 to 2018. The pooled mean group regression estimator was used, which suitably isolates short run from long run impacts while allowing for heterogeneities and homogeneities for each run respectively. Additionally, generalized method of moments technique was applied for robustness check and allows for dynamism in the estimations. Findings show that financial development is sensitive to both productive and non‐productive government expenditures in the long run. They affirm positive impacts convergences on financial development. Financial development responds only to non‐productive expenditures in the short run. Young and elderly populations do not benefit financial development but mature population does due to its active role in the private sector. Further, it helps support the negative impact of inflation and provides positive impacts of economy openness and individual's economic output. Also, results support short‐run adjustment towards long‐run equilibrium. These results are significant both statistically and economically. Unlike former studies, this work comprehensively disaggregated government expenditure into productive and unproductive types. It isolated population structure age‐wise. In order to stimulate financial development, governments in Africa need to favour policies that stabilize government expenditures, having both short‐run and long‐run foci, encourage public–private partnership and mutually beneficial linkages, devise population policies based on respective age‐structures, and promote economy openness, and growth per capita, and control inflation.

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Revisiting the role of inflation in financial development: unveiling non-linear and moderating effects

Cited by 14 publications

References 45 publications

Does excessive degrees of financial depth push hyper-inflation?

Does excessive degrees of financial depth push hyper-inflation?

Financial development and institutional quality among emerging economies

Financial development in Africa: Do expenditure and population matter? Evidence through pooled mean group and generalized method of moments estimators

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