Inflation and Financial Sector Correlation: The Case of Bangladesh

Abstract

This paper examines the impact of inflation on financial development in case of Bangladesh for the period of 1985-2005. In doing so, ARDL bounds testing approach and Error Correction Method (ECM) have been employed. Empirical findings reveal that high trends of inflation impede the performance of financial markets. GDP per capita promotes development of financial sector through its causal channels.Keywords: Financial Sector; Inflation; Bangladesh; ARDL ApproachJEL Classifications: D14; E31