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Inflation and Finance: Evidence from Brazil

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  • Manoel F. Bittencourt

Abstract

In this paper we examine the impact of inflation on financial development in Brazil. The data available permit us to cover the eventful period between 1985 and 2002 and the results-based initially on time series and then on panel time series data and analysis, and robust for different estimators, specifications and financial development measures-suggest that high and erratic rates of inflation presented deleterious effects on finance at the time. The main policy implication arising from the results is that poor macroeconomic performance, exemplified by high rates of inflation, can only have detrimental effects on finance, a variable that is important for directly affecting, e.g., economic growth and development, and income inequality. Therefore, low and stable inflation is a necessary first step to achieve a more inclusive and active financial sector with all its attached benefits.

Suggested Citation

  • Manoel F. Bittencourt, 2007. "Inflation and Finance: Evidence from Brazil," The Centre for Market and Public Organisation 07/163, The Centre for Market and Public Organisation, University of Bristol, UK.
    • Handle: RePEc:bri:cmpowp:07/163
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    File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp163.pdf
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    References listed on IDEAS

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    1. Dollar, David & Kraay, Aart, 2002. "Growth Is Good for the Poor," Journal of Economic Growth, Springer, vol. 7(3), pages 195-225, September.
    2. Christina D. Romer & David Romer, 1999. "Monetary policy and the well-being of the poor," Economic Review, Federal Reserve Bank of Kansas City, vol. 84(Q I), pages 21-49.
    3. Stanley Fischer, 2005. "IMF Essays from a Time of Crisis: The International Financial System, Stabilization, and Development," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262562162, December.
    4. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    5. Mr. Irineu E de Carvalho Filho & Mr. Marcos d Chamon, 2006. "The Myth of Post-Reform Income Stagnation in Brazil," IMF Working Papers 2006/275, International Monetary Fund.
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    Cited by:

    1. Abu N. M. Wahid & Muhammad Shahbaz & Pervaz Azim, 2011. "Inflation and Financial Sector Correlation: The Case of Bangladesh," International Journal of Economics and Financial Issues, Econjournals, vol. 1(4), pages 145-152.
    2. Can, Zeynep Gizem & O'Donoghue, Cathal & Sologon, Denisa Maria & Smith, Darius & Griffin, Rosaleen & Murray, Una, 2023. "Modelling the Distributional Effects of the Cost-of-Living Crisis in Turkey and the South Caucasus: A Microsimulation Analysis," IZA Discussion Papers 16619, Institute of Labor Economics (IZA).
    3. Haroon Khan, 2015. "The Impact of Inflation on Financial Development," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 1(4), pages 42-48, October.
    4. Monal Abdel-Baki, 2011. "The efficacy of the Egyptian bank reform plan in mitigating the impact of the global financial crisis," Economic Change and Restructuring, Springer, vol. 44(3), pages 221-241, August.

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    More about this item

    Keywords

    Financial development; inflation; growth; inequality; Brazil.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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