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Threshold Relationships among Inflation, Financial Market Development and Growth

Michelle Barnes

No 2000-04, School of Economics Working Papers from University of Adelaide, School of Economics

Abstract: This paper tests for and estimates non-dynamic panel threshold relationships among inflation, financial market development and growth, where the relationship changes once a threshold level of inflation is reached. Robust statistical support of a single threshold value of inflation (about 14%) is found for this trivariate relationship. A strong positive relationship between growth and financial market development occurs before the threshold, and a strong negative relationship between growth and inflation occurs after the threshold. When an interaction variable between inflation and financial market development is introduced, the relationship between growth and inflation is significantly negative only before the threshold.

Keywords: thresholds; growth; financial markets; inflation; panel methods (search for similar items in EconPapers)
JEL-codes: C4 E5 E6 G2 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2000
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