Empirical Insights on Inflation, Financial Development and Income Inequality in Central and Eastern European Countries

Mihaela Simionescu and Javier Cifuentes-Faura
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Javier Cifuentes-Faura: Faculty of Economics and Business, University of Murcia, Spain

Czech Journal of Economics and Finance (Finance a uver), 2025, vol. 75, issue 1, 29-58

Abstract: Given the recent debates on high inflation and widening income inequality in the post-pandemic period, this paper examines the empirical relationship between inflation, financial development, and income inequality in Central and Eastern European (CEE) countries in the period 2004-2022 using advanced panel data models to account for potential endogeneity, long-run and short-run patterns. The findings suggest that inflation has a positive impact on income inequality. Financial development exhibits a negative association with income inequality in the long-run and its interaction with inflation reduces income inequality. This suggests that a more developed financial system can help to reduce income inequality by facilitating access to credit and financial services for all segments of the population.

Keywords: inflation; financial development; income inequality; CEE countries (search for similar items in EconPapers)
JEL-codes: C23 E31 O15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:75:y:2025:i:1:p:29-58

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