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Does the development of financial system influence the level of inflation?

Author

Listed:
  • André Arnaud ENGUENE
  • Emmanuelle Dorcas MBANGA PAGAL
  • Armel Romaric WEPAGUIEWE

Abstract

Purpose: The objective of this paper is to examine the impact of financial development on inflation in the Economic and Monetary Community of Central Africa.Method: We use a system GMM as an empirical strategy, using data from the BEAC and WDI databases over the period 1996–2022.Results: The main results of this study show that despite the low level of inflation observed in the Economic and Monetary Community of Central Africa, the credit risk associated with the provision of credit increases inflation. This increase in inflation reduces the performance of the financial sector.Originality of the article: The originality of this article lies in the fact that the central bank must consider financial development as a tool of prudential analysis, which makes it possible to increase the effectiveness of the fight against inflation while improving the performance of the financial sector. This study also shows that financial development is a determinant of inflation.

Suggested Citation

  • André Arnaud ENGUENE & Emmanuelle Dorcas MBANGA PAGAL & Armel Romaric WEPAGUIEWE, 2023. "Does the development of financial system influence the level of inflation?," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 14(2), pages 17-32, December.
    • Handle: RePEc:jaf:journl:v:14:y:2023:i:2:n:521
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    References listed on IDEAS

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    1. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    2. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    3. Khaled Batayneh & Wasfi Al Salamat & Mohammad Q.M. Momani & David McMillan, 2021. "The impact of inflation on the financial sector development: Empirical evidence from Jordan," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1970869-197, January.
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    More about this item

    Keywords

    Financial system; inflation; GMM system; performance; spillovers; Système financier; inflation; GMM en système; performance; effets de débordement;
    All these keywords.

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • N8 - Economic History - - Micro-Business History
    • G3 - Financial Economics - - Corporate Finance and Governance

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