INFLATION AND FINANCIAL DEVELOPMENT IN SUB-SAHARAN AFRICA

Witness Bandura and Temitope L. A. Leshoro

Economic Annals, 2022, vol. 67, issue 233, 85 - 112

Abstract: This paper analyses the relationship between inflation and financial development in sub-Saharan Africa. This issue is important because the level beyond which the inflation rate affects financial development in sub-Saharan Africa is not known, despite the underdeveloped financial system in the region. This paper presents a model in which inflation is endogenously determined, and uses a dynamic panel threshold approach which takes this factor into consideration to ensure improved results. The pure cross-section method and non-dynamic panel threshold approaches were also utilised. Strong evidence of a negative impact of inflation on financial development is obtained, which increases with a rise in inflation. An average inflation threshold of about 5% is established, below which a positive impact on financial development is found. There is, however, a negative relationship beyond the observed threshold. The paper provides policy recommendations as to how authorities should contain inflation to facilitate financial sector development in the region.

Keywords: inflation; financial development; panel threshold techniques; sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: E31 E4 E5 P44 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ekof.bg.ac.rs/wp-content/uploads/2014/04/049.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:beo:journl:v:67:y:2022:i:233:p:85-112

Ordering information: This journal article can be ordered from
http://ea.ekof.bg.ac.rs/

Access Statistics for this article

Economic Annals is currently edited by Will Bartlett

More articles in Economic Annals from Faculty of Economics and Business, University of Belgrade Contact information at EDIRC.
Bibliographic data for series maintained by Goran Petrić ().