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Inflation and Financial Development: Evidence from Brazil

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Author Info
Bittencourt, Manoel

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Abstract

We examine the impact of inflation on financial development in Brazil and the data available permit us to cover the period between 1985 and 2002. The results ? based initially on time-series and then on panel time-series data and analysis, and robust for different estimators and financial development measures ? suggest that inflation presented deleterious effects on financial development at the time. The main implication of the results is that poor macroeconomic performance has detrimental effects to financial development, a variable that is important for affecting, for example, economic growth and income inequality. Therefore, low and stable inflation, and all that it encompasses, is a necessary first step to achieve a deeper and more active financial sector with all its attached benefits.

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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Papers with number RP2008/14.

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Length: 26 pages
Date of creation: 2008
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Handle: RePEc:unu:wpaper:rp2008-14

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Keywords: financial development; inflation; Brazil;

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