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The impact of inflation on the financial sector development: Empirical evidence from Jordan

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  • Khaled Batayneh
  • Wasfi Al Salamat
  • Mohammad Q.M. Momani
  • David McMillan

Abstract

In any economy, the financial sector plays a fundamentally important role in achieving economic growth and thus achieving sustainable economic development. Therefore, interest in this sector and the improvement of its performance is considered a strategic goal for any country. Accordingly, this study aims to analyze the short- and long-run impacts of inflation on the development of this sector on the Jordanian economy for the period from 1993 to 2018. To do so, the study uses an auto-regressive distributed lag bound testing approach, which is considered an advanced analytical model. Empirical findings confirmed that there is a statistically significant long- and short-run negative effect of inflation on financial sector development. On the contrary, there is a statistical significant long- and short-run positive impact of economic growth on financial sector performance. In addition, results confirmed that there is a positive support of the previous financial sector policies on financial sector performance in the current period.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:1970869
    DOI: 10.1080/23322039.2021.1970869
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    Citations

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    Cited by:

    1. Hamdi Becha & Maha Kalai & Kamel Helali, 2023. "Smooth transition regression model relating inflation to economic growth in Tunisia," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-26, December.
    2. 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.
    3. Michael S. Akpan & Marvelous Aigbedion & Joshua Jeremiah Dandaura & Irimiya Christabel Musa, 2024. "Impact of Financial Sector Development, Trade and Economic Growth in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 1880-1894, August.
    4. Kenan İlarslan, 2024. "Non-parametric evidence on the determinants of access to financial services in the countries of the Organization of Turkic States," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(4), pages 1035-1055, December.
    5. Zheng, ShiYong & Liu, Hua & Hafeez, Muhammad & Wang, Xiaofeng & Fahad, Shah & Yue, Xiao-Guang, 2023. "Testing the resource curse hypothesis: The dynamic roles of institutional quality, inflation and growth for Dragon," Resources Policy, Elsevier, vol. 85(PA).

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