Inflation and the finance-growth nexus

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Title:	Inflation and the finance-growth nexus
Authors:	Huang, Ho-chuan;Lin, Shu-chin;Kim, Dong-Hyeon;Yeh, Chih-chuan
Contributors:	淡江大學財務金融學系;淡江大學經濟學系
Keywords:	Financial development;Economic growth;Threshold regression;Instrumental variable;Inflation
Date:	2010-01
Issue Date:	2011-10-24 10:31:39 (UTC+8)
Publisher:	Amsterdam: Elsevier BV * North-Holland
Abstract:	This paper re-investigates whether there exist inflation thresholds in the finance–growth linkage. By applying the Caner and Hansen's (2004) instrumental-variable threshold regression approach to the dataset of Levine et al. (2000), we find strong evidence of a nonlinear inflation threshold in the relationship, below which financial development exerts a significantly positive effect on economic growth, while, above which, the growth effect of finance appears to be insignificant. Furthermore, we also find a positive and significant relationship between finance and productivity for inflation rates below the threshold level, but no such relationship is detected for inflation rates above the critical level. This result suggests that finance influences growth mainly through the productivity channel.
Relation:	Economic Modelling 27(1), pp.229-236
DOI:	10.1016/j.econmod.2009.09.003
Appears in Collections:	[Graduate Institute & Department of Economics] Journal Article [Graduate Institute & Department of Banking and Finance] Journal Article

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