IDEAS home Printed from https://ideas.repec.org/a/taf/oaefxx/v10y2022i1p2093430.html
   My bibliography  Save this article

The role of inflation in financial development–economic growth link in sub-Saharan Africa

Author

Listed:
  • Muazu Ibrahim
  • Olufemi Adewale Aluko
  • Xuan Vinh Vo

Abstract

The impact of financial development (FD) on economic growth (EG) is well documented. However, studies on how inflation mediates the impact of FD on EG produce inconclusive findings. Meanwhile, the tripartite relationship among FD, inflation and EG is particularly crucial for sub-Saharan African countries given that these countries are largely inflationary on the back of under-developed financial sectors and low EG. The inconclusive evidence presented by the existing studies limits policy making. This study therefore re-examines whether inflation mediates the FD–EG nexus by utilizing a panel data obtained from 36 countries in sub-Saharan Africa. The study uses the sample splitting threshold approach to investigate this relationship. The findings identify inflation thresholds of 7.65% and 6.76% at which the impact of FD on EG changes sign. Specifically, irrespective of the indicator of FD, higher FD significantly increases EG at low inflation rates. However, beyond the estimated thresholds, the impact of FD on EG is insignificant, revealing that higher inflation does not support the growth-enhancing effect of FD. The research recommends that inflation should be kept below the identified thresholds for FD to spur EG.

Suggested Citation

  • Muazu Ibrahim & Olufemi Adewale Aluko & Xuan Vinh Vo, 2022. "The role of inflation in financial development–economic growth link in sub-Saharan Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2093430-209, December.
  • Handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2093430
    DOI: 10.1080/23322039.2022.2093430
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/23322039.2022.2093430
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/23322039.2022.2093430?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zheng, ShiYong & Liu, Hua & Hafeez, Muhammad & Wang, Xiaofeng & Fahad, Shah & Yue, Xiao-Guang, 2023. "Testing the resource curse hypothesis: The dynamic roles of institutional quality, inflation and growth for Dragon," Resources Policy, Elsevier, vol. 85(PA).
    2. 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.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:oaefxx:v:10:y:2022:i:1:p:2093430. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/OAEF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.