The Relationship between Financial Development and Inflation Rate in Egypt
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Author: Abdullah Mohammad Ghazi Al khatib , Vikash Pawariya , Soumik Ray , Priyanka Lal3, Pradeep Mishra *, Lokesh Kumar and Ali Kanaan
Author Address: Department of Banking and Insurance, Faculty of Economics, Damascus University, Damascus (Syrian Arab Republic), Department of Agricultural Economics, Nagaur, Agriculture University, Jodhpur-342304 (Rajasthan), 3Lovely Professional University, Phagwara-14
Keywords: Causality, cointegration, financial development, inflation.
JEL Codes: B23, B26, C32, G21.
Abstract
This study investigated the relationship between financial development and inflation in Egypt from 1980-2018. The study employed various econometric techniques, such as Johansen's test for co-integration, error correction model, Granger's causality test, Toda-Yamamoto causality test, and dynamic ordinary least squares model. The findings indicated that financial development had not significantly reduced inflation in Egypt over the studied period. Additionally, inflation was an obstacle to the country's financial development. The results also suggested a long-term equilibrium relationship between financial development and inflation, which is unidirectional and runs from inflation to financial development. The results revealed that the inflation rate, economic growth, exchange rate, and trade openness jointly impact financial development in the short and long term. It implied that the past values of these variables could be used to predict the current and future values of financial development. However, it was not possible to use the financial development index to predict the inflation rate in Egypt in the short and long term.
Description
Indian Journal of Economics and Development
Volume 19 No. 1, 2023, 17-31
DOI: https://doi.org/10.35716/IJED/22298
NAAS Score: 5.15 (2023)
Indexed in SCOPUS and ESCI (Clarivate Analytics)
Journal Citation Indicator: 0.04 (WoS)
UGC Approved