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The Role of the Financial System in the Growth-Inflation Link: the OECD Experience

  • Javier Andrés
  • Ignacio Hernando
  • J. David López-Salido

The main contribution of this paper is to jointly estimate the effects of financial development and inflation on growth. We aim to exploit both the cross-section and the time-series dimension of the data on inflation, growth and some banking and stock market indicators over the period 1961-1993 for a sample of OECD countries. Overall, the results indicate, first, that the long-run costs of inflation are not explained by policies of financial repression, and second, that if inflation affects growth through its interaction with financial market conditions, this is not the only (nor the most important) channel.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/99/Fic/dt9920e.pdf
File Function: First version, 1999
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Paper provided by Banco de España & Working Papers Homepage in its series Working Papers with number 9920.

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Length: 37 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:bde:wpaper:9920
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