Abstract
This study gives some issues regarding the relationship between inflation and the financial sector performance for some MENA region countries. The negative association is confirmed through the estimation of a dynamic panel model using the GMM methodology. Moreover, a threshold effect must be also identified in order to prove that negative effect of inflation on the financial sector performance becomes appreciable once the rate of inflation exceeds some threshold.
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Notes
Notes
1. Boyd et al. (Citation2001) include in their sample only Egypt, Jordan and Morocco.
2. See Appendix.
3. This definition of stock market development is used here rather than a composite index of stock market development because it is a good proxy for general development, and individual measures and indexes of stock market development are strongly associated (Demirgüç-Kunt and Levine, Citation1996).
4. The three variables are noted, respectively, Real per capita GDP, Schooling and Government.
5. See also Arellano and Bover (Citation1995), and Blundell and Bond (Citation1998).
6. Note that the vector (X it –X it −1) contains the component (y it −1–y it −2).
7. See also Hansen (Citation2000).
8. An appropriate algorithm was written on STATA7 software.