INFLATIONARY THRESHOLD EFFECTS IN THE RELATIONSHIP BETWEEN FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH: EVIDENCE FROM TAIWAN AND JAPAN

Chien-Chiang Lee () and Swee Yoong Wong
Additional contact information
Swee Yoong Wong: Department of International Trade, Shih Chien University, Kaohsiung Campus

Journal of Economic Development, 2005, vol. 30, issue 1, 49-69

Abstract: This paper employs a threshold regression model to investigate the existence of inflation threshold effects in the relationship between financial development and economic growth. A specific question that is addressed in this paper is what the threshold inflation rates are for Taiwan and Japan. Results indicate that there is one inflation threshold value in Taiwan, whereas there are two in Japan. Earlier studies support the view that financial development may promote economic growth. However, the conclusion drawn from the empirical findings suggests that it can only be achieved under low and moderate inflation. In addition, the threshold level of inflation below which financial development significantly promotes growth is estimated at 7.25% for Taiwan and 9.66% for Japan. The empirical findings from the threshold regression model indicate that inflationary threshold for both countries occurred in the high inflation period of the world energy crises in the 70s.

Keywords: Threshold Regression Model; Inflation; Financial Development; Economic Growth (search for similar items in EconPapers)
JEL-codes: C22 E44 O16 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.jed.or.kr/full-text/30-1/04_J696.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:jed:journl:v:30:y:2005:i:1:p:49-69

Access Statistics for this article

Journal of Economic Development is currently edited by Sung Y. Park

More articles in Journal of Economic Development from Chung-Ang Unviersity, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sung Y. Park ().