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Inflation and Financial Development: Evidence from Brazil

  • Manoel Bittencourt

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, e.g. 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 Economic Research Southern Africa in its series Working Papers with number 67.

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Date of creation: 2008
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Handle: RePEc:rza:wpaper:67
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