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Threshold effects of inflation on the financial development-economic growth nexus in Tunisia

Author

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  • Kamel Helali
  • Khoutem Ben Jedidia
  • Thouraya Boujelbène

Abstract

The main purpose of this paper was to ascertain the effect of inflation on the growth-enhancing role of financial development assuming a non-linearity relationship between finance and growth under different inflation regimes. The empirical study was carried out using the threshold regression model over the period of the first month of 1982 to the twelfth month of 2018. We found a strong evidence of a threshold effect (4.89%) which modifies the impact of financial deepening on growth in Tunisia. If the inflation rate falls below 4.89%, financial depth stimulates economic growth. However, this effect is weakened as inflation rate grows. Oppositely, credit growth of commercial banks is not efficient enough to contribute to economic growth. Thus, high inflation disrupts the growth-enhancing role of finance in Tunisia. Practically, the Tunisian monetary authorities are recommended to keep an inflation rate under 4.89% to reach a sustainable growth through financial development.

Suggested Citation

  • Kamel Helali & Khoutem Ben Jedidia & Thouraya Boujelbène, 2021. "Threshold effects of inflation on the financial development-economic growth nexus in Tunisia," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 14(5), pages 438-459.
    • Handle: RePEc:ids:ijmefi:v:14:y:2021:i:5:p:438-459
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    Citations

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    Cited by:

    1. Arvian Triantoro & Muhammad Zaheer Akhtar & Shiraz Khan & Khalid Zaman & Haroon ur Rashid Khan & Abdul Wahab Pathath & Muhamad Amar Mahmad & Kamil Sertoglu, 2023. "Riding the Waves of Fluctuating Oil Prices: Decoding the Impact on Economic Growth," International Journal of Energy Economics and Policy, Econjournals, vol. 13(2), pages 34-50, March.
    2. Amal Ben Abdallah & Sourour Guidara & Rima Aloulou & Maha Kalai & Kamel Helali, 2024. "Investigating the relationship between inflation and economic growth in Mauritania: an empirical analysis using the regime change model," SN Business & Economics, Springer, vol. 4(1), pages 1-25, January.
    3. Hamdi Becha & Maha Kalai & Kamel Helali, 2023. "Smooth transition regression model relating inflation to economic growth in Tunisia," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-26, December.

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