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Empirical Insights on Inflation, Financial Development and Income Inequality in Central and Eastern European Countries

Author

Listed:
  • Mihaela Simionescu

    (Faculty of Business and Administration, University of Bucharest, Romania & Academy of Romanian Scientists, Bucharest, Romania & Institute for Economic Forecasting, Romanian Academy, Bucharest, Romania)

  • Javier Cifuentes-Faura

    (Faculty of Economics and Business, University of Murcia, Spain)

Abstract

Given the recent debates on high inflation and widening income inequality in the post-pandemic period, this paper examines the empirical relationship between inflation, financial development, and income inequality in Central and Eastern European (CEE) countries in the period 2004-2022 using advanced panel data models to account for potential endogeneity, long-run and short-run patterns. The findings suggest that inflation has a positive impact on income inequality. Financial development exhibits a negative association with income inequality in the long-run and its interaction with inflation reduces income inequality. This suggests that a more developed financial system can help to reduce income inequality by facilitating access to credit and financial services for all segments of the population.

Suggested Citation

  • Mihaela Simionescu & Javier Cifuentes-Faura, 2025. "Empirical Insights on Inflation, Financial Development and Income Inequality in Central and Eastern European Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 75(1), pages 29-58, March.
    • Handle: RePEc:fau:fauart:v:75:y:2025:i:1:p:29-58
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1544
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    More about this item

    Keywords

    inflation; financial development; income inequality; CEE countries;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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