Dynamic relationship between inflation and financial development

Dong Hyeon Kim, Shu Chin Lin

Research output: Contribution to journalArticlepeer-review

45 Citations (Scopus)


This paper studies the long- and short-run relationships between inflation and financial development. Applying the Pooled Mean Group estimator of Pesaran, Shin, and Smith (1999, Journal of the American Statistical Association 94, 621-634) to unbalanced panel data for 87 countries over the period 1960-2005, we find that a negative long-run relationship between inflation and financial development coexists with a positive short-run relationship. However, when the data are split into different income or inflation groups, these results can be observed only in low-income or low-inflation economies.

Original languageEnglish
Pages (from-to)343-364
Number of pages22
JournalMacroeconomic Dynamics
Issue number3
Publication statusPublished - 2010 Jun
Externally publishedYes


  • Financial Development
  • Inflation
  • Pooled Mean Group Estimator

ASJC Scopus subject areas

  • Economics and Econometrics


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